The proposed attempt by the Central Bank of Russia (CBR) to ban digital currencies and related operations in the country has been identified by Fitch Ratings, a platform that publishes ratings, criteria, and methodologies on global economic issues, as a double-edged move that has its ups and downs.
The Good and Bad the Russian Ban Could Stir
According to Fitch, the CBR’s crypto ban can help forestall the risks that cryptocurrencies can pose to the broader financial ecosystem in the country. This will help provide a good soft landing for the Central Bank Digital Currency (CBDC) or Digital Ruble the CBR is looking to introduce.
However, President Vladimir Putin reportedly backs the proposal of crypto mining, rejecting the suggestion of a total ban of crypto from CBR, according to Bloomberg. Kremlin did not comment on Putin’s stance yet.
Russia enjoys the third-largest crypto mining status, after the U.S. and Kazakhstan. Previously, Blockchain.News reported that the CBR wanted to place a blanket ban on cryptocurrencies, cryptocurrency-based transactions, and Proof-of-Work (PoW) mining activities in the country. While the plan has been staunchly opposed by top tech and political oligarchs in the country, the CBR seems resolute in trailing China which placed a similar ban on the nascent asset class last year.
While the ban will eliminate risks, as pointed out, should the CBR have its way in banning the asset class, Fitch said the central bank will increase its “capacity to monitor and manage financial flows, which the growth of cryptocurrency transactions might otherwise erode.”
Per the implications of the ban and coupled with the proposed CBDC introduction, deposits in banks are poised to be impacted as well as a stump on technological innovations in the country.
“We believe the introduction of the CBDC may result in some deposit outflows from the banking system, modestly increasing competition for funding and raising interest rates,” the report reads, adding the ban “could set back Russian banks’ engagement with the technologies underlying the cryptocurrency sector.”
Russian Crypto Ban Still Hangs in the Balance
The ban on cryptocurrencies is a much-debated social, economic and financial issue in Russia, whose crypto ecosystem is estimated to be worth about $5 billion annually. While the proposed ban has been widely publicized, it is not yet in effect, and its hopes rest on the comment that is being solicited from members of the public.
Many countries, including India, have explored banning crypto for a long time; However, the authorities are exploring a more proactive measure to engage with the growing industry through comprehensive regulations that are still in the works.
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