January 31, 2022
Credit rating agency Fitch published a research piece about Russia’s proposed ban on cryptocurrencies. Even though the report agrees that the Russian government’s move to ban would limit exposure to fraudulent activities in the financial sector, the report indicates that this could “hold back the diffusion of technologies that could improve productivity.”
Here are some facts:
Fitch believes that another motive for the restrictions may be to favor the development of Russia’s proposed central bank digital currency (CBDC), as in China.
Further, the introduction of CBDC may lead to some deposit outflows from the banking system which in turn increase competition for funding and raise interest rates.
Thus, the central bank of Russia aims to provide commercial banks with access to its refinancing operations in the required amount to substitute deposit outflows and maintain financial stability.
Russia’s retail cryptocurrency operations currently stand at about $5 billion per year. The Russian authorities are oscillating between banning cryptocurrency as well as introducing a regulatory framework for various reasons.
Fitch suggests that outright banning crypto in Russia will block off potential revenue-generating activity and weaken the Russian banking sector’s operational environment relative to peers.
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About the author
Priyanka Shetty is a full-time communication professional and a part-time crypto writer based in Bengaluru. She can write about crypto but not so much about herself. She says she is just a girl who wants to meet your dog