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Russia’s central bank is making move toward a ban on all cryptocurrency investments amid increasing speculation toward digital assets from financial officials in the country. The logistics of such a ban presents a unique challenge, as officials must account for the countless investments made by those currently holding various cryptocurrencies. Officials argue that cryptocurrencies present significant risks to financial stability, while crypto enthusiasts would argue that a lack of financial stability is exactly why these assets are so important.

THE CURRENT STATE OF CRYPTO

The volatility of cryptocurrencies has been glaringly apparent over the past few years, as prices throughout the industry have spiked and dropped, sometimes overnight. Bitcoin, one of the most popular cryptocurrencies, recently dipped below $50,000, sparking concern after what appeared to be a period of stability for the digital asset, with prices soaring to more than $60,000 per Bitcoin. The volatility of cryptocurrencies has caught the attention of investors, who have turned to new investing strategies amidst global inflation concerns. However, this shift has also caught the attention of regulating officials in governments throughout the world. That same volatility that caught the eye of investors may have added credibility to the claims of Russian officials, who have argued against cryptocurrencies for years.

In addition to the dangers of investing in such volatile assets, Russian lawmakers have argued that cryptocurrencies could present legal issues by making money laundering and financial terrorism more prevalent throughout the country. Cryptocurrencies operate on a blockchain network, where peer-to-peer interactions complete transactions and maintain a ledger that exists beyond the jurisdiction of a central bank or government. Such a ledger could be a hot bed for illegal activity, if users chose to manipulate it as such.

CRYPTO IN RUSSIA

Sources have suggested that the central bank is proposing a “complete rejection” of all cryptocurrencies. That being said, Russia has been working on their own digital currency backed by the ruble. Additionally, the country allegedly invested in crypto to limit sanctions imposed on them for their involvement with meddling in the 2016 U.S. election. Of course, one of the largest challenges that Russian lawmakers face, is the fact that residents in Russia have already invested in cryptocurrency for years, leaving them with a fair amount of assets that would soon be banned.

The proposed rejection of cryptocurrencies would not force those holding digital assets into forfeiting them or leaving the country; the new sanctions would simply prevent all future transactions. This isn’t the first time that the central bank has approached the challenge that cryptocurrencies present. In fact, in 2020, the central bank awarded digital currencies legal status, yet prohibited their use as a means of payment. Just last week, the bank issued new rules for mutual funds, blocking them from investing in cryptocurrencies.

THREATENING A BUDDING INDUSTRY

For years it seemed as though cryptocurrencies were thriving in Russia. The industry has seen an estimated $5 billion in crypto transactions annually, with nearly 12 percent of the population already owning cryptocurrency. For reference, the United States who also appears to be embracing cryptocurrency has roughly 8 percent of its residents owning crypto.

Russia isn’t the first government to look into regulating or restricting crypto, however. The United States government has been closely examining ways to regulate crypto, while India has banned cryptocurrencies altogether. China has also been in the news recently for their crackdown on crypto mining. The Chinese central bank also deemed all cryptocurrency transactions illegal, banning all crypto.

While Russia’s central bank has not officially made a decision, it seems as though a ban similar to China’s could occur in the near future.