After weeks of uncertainty surrounding Russia's plans for cryptocurrencies, local news outlet RBC reports overnight that Bank of Russia is working with the country’s general prosecutor to block all exchanges offering Russians the opportunity to buy and sell cryptocurrency.
As CoinTelegraph reports, first deputy of the central bank, Sergey Shvetsov, said during an international finance forum in Moscow:
“It’s obvious that when a pyramid (scheme) grows, interest in this pyramid hots up with the high rate of return."
Echoing previous comments, Shvetsov added that the pyramid description is a result of “eyeing Bitcoin’s price dynamics over the past two years.”
The move is the most sweeping yet from Russian authorities regarding cryptocurrency access for citizens, and echoes the less coordinated bans of various industry resources common until last year. The debate as to how to handle cryptocurrency has raged throughout 2017 in Russia, with various high-profile entities giving conflicting views as to what the future will hold in terms of regulation.
This regulation is ostensibly due to go public by the end of the year.
In the meantime, not just private investors, but also the business sector faces “too high a risk” using cryptocurrency, Shvetsov said.
“We cannot stand apart. We cannot give direct and easy access to such dubious instruments for retail (investors),”
Financial instruments based on cryptocurrency are “impossible to support,” he continued, adding measures would be taken to “restrict” the ability of the Russian domestic market to interact with them.
The reaction was varied. As Coinivore notes, Bitcoin prices flash-crashed on CoinDesk...
Notably, this would be the third time that the country has issued some form of ban against Bitcoin and digital currency in the past several years.
Russia’s Central Bank just approved its first exchange “Voskhod,” so this is likely a temporary ban until regulations are set which will likely ban normal Russian citizens from investing into cryptocurrency due to high volatility.
However, Bitcoin is now higher on the day (bouncing back as it did from China's ban), and as BitStamp data shows, not every exchange shows the flash-crash...
It seems the market for Bitcoin is quick to realize that the dcecentralized nature of the cryptocurrency framework means that whiole short-term demand from localized exchange closures may hobble prices, it does not affect the overall value of the independent currency (just as many have found out since China blocked exchanges).
We would not expect this to be the last nation to attempt to 'ban' Bitcoin. As Cybersecurity expert John McAfee warns, cryptocurrencies may encompass the sum of all fears for governments the world over.
With no centralized exchange to control or influence, national authorities around the world will find it increasingly difficult to determine a given citizen's income and thus their income tax owed, undermining a critical source of government revenue.
Our income taxes are the greatest source of revenue, but if everybody’s using Bitcoin, the government doesn’t know what your income is. They can’t tax it, and if you choose to say I didn’t have anything, they cannot prove otherwise,” McAfee told CalvinAyre.com.
“It will eventually frighten every nation state, but it doesn’t matter what they do, there’s no way you can create a law or to legislate something that will stop Bitcoin or any cryptocurrency because technically, you cannot,” he added.
The often outspoken and eccentric McAfee did highlight the need for some regulation, however, preaching caution over the latest trend of government-sponsored Initial Coin Offerings (ICOs).
“China is right about one thing, the ICOs, the initial coin offerings, there are lots of scams, lots of people who are fraudulently taking money from other people, so that’s got to stop. But I don’t think governments can stop it. We as users and the bitcoin community have to be self-regulated,” McAfee said.
“The fear is in the fear of governments and central banks, like JPMorgan, which is America’s largest bank,” he said. “The CEO is so concerned that he acted like a madman and called Bitcoin a fraud, said someone is going to get killed eventually. It’s like, what are you talking about? It’s nonsense.”
"So banks and governments are the ones that have the fear. Well they should have some fear. They have taken control and power away from their citizens for hundreds of years. It’s time that we, as citizens, took that power back."