Unless you’re fluent in the Russian language, you won’t understand what’s in the Bank of Russia’s Financial Stability Department’s recently issued report, “Cryptocurrencies: trends, risks, measures.” At the same time, it’s important to know what’s in the report, especially if you’re a crypto investor.
For one thing, the report helps to explain why Bitcoin dropped below $35,000 recently, and why Ethereum sank to $2,350. Sure, the broader tech-market rout undoubtedly spread to the crypto-sphere, but that’s not the core story here.
Remember how China has threatened to ban cryptocurrency-related activity, and how some U.S. Congress members have lobbed verbal attacks against crypto, based on allegations that cryptocurrency users are frauds and gangsters?
That same argument is resurfacing now, but this time it’s coming out of Russia, or more specifically, the Bank of Russia and the director of its Financial Stability Department, Elizaveta Danilova.
During a webcast from the Bank of Russia, Danilova presented the aforementioned report. Apparently, that report states that cryptocurrencies are volatile and widely used in illegal activities such as fraud.
Are you starting to get a sense of déjà vu from this line of argument? Russia’s excuse for clamping down on cryptocurrency-related activity is quite familiar by now, though I’m fairly confident that the vast majority of crypto miners, investors, and users aren’t gangsters and fraudsters.
Bank of Russia Financial Stability Department Director Elizaveta Danilova. Courtesy: CoinDesk
Still, the rhetoric continues: the report claims that cryptocurrency offers an outlet for people to take their money out of the national economy. With that, crypto users supposedly risk undermining the Russian economy and making the Bank of Russia’s job of maintaining optimal monetary policies harder.
Of course, that’s the whole point of cryptocurrency: to take the power back from reckless regulators and put it in the hands of the people. Instead of entrusting their wealth to the national/government economy, crypto users seek to create their own currency and economy without Big Brother’s intervention/manipulation and relentless money printing.
Nevertheless, regulators are going to do what they please, with or without the will of the people. So now, the Bank of Russia, which has already prohibited mutual funds from investing in cryptocurrencies, is suggesting introducing penalties for breaking that ban.
But wait, it gets worse. Russian institutional investors should not be allowed to invest in crypto assets, and no Russian financial organizations or infrastructure should be used for cryptocurrency transactions, according to the regulator.
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To top it all off, the Russian central bank, declared that Russia needs new laws and regulations to effectively ban cryptocurrency-related activities: the “optimal solution” would be to ban crypto mining in Russia, the regulator said in the report. (For what it’s worth, however, the bank isn’t suggesting banning ownership of crypto by private citizens.)
This news bombshell had a profound and immediate impact on cryptocurrency prices across the board, including Bitcoin, the world’s most popular and heavily traded crypto coin.
Naeem Aslam, chief market analyst at AvaTrade, observed that this development took place during a particular sensitive time for crypto, as January tends to be a volatile month for Bitcoin on a historical basis.
Courtesy: Yahoo Finance
“The thing with Bitcoin is that when it begins to fall, the price action drops like there is no tomorrow,” Aslam added. This is certainly true, though we can also point out that Bitcoin has recovered from every price drop in the past.
Katie Stockton, managing director of Fairlead Strategies, reinforced that this is a critical juncture for cryptocurrency, saying, “Many altcoins are into support at their summertime 2021 lows, making it critical that Bitcoin holds support as it sets the tone for the cryptocurrency space.”
At the same time, Bitcoin traders don’t necessarily have to panic-sell their holdings in fear of a Russian crypto carpet bombing.
The probability of a complete Russian ban of the entire cryptocurrency industry is “negligible,” said Roman Zabuga, the PR director of mining hosting provider BitRiver. Furthermore, “This is the Russian central bank reiterating their old sentiment ahead of upcoming working group formation,” Compass Mining CEO Whit Gibbs assured.
As usual, the fear is probably going to be worse than the actual outcome. If anything, this crypto dip is a just chance to add to your position if you missed the bus the first, second, third and many other times around.
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