Use of private virtual currencies (cryptocurrencies)
The Bank of Russia confirms its position expressed in January 2014 with regard to various private ‘virtual currencies’ (cryptocurrencies).
The Bank of Russia has noted a rapid growth in the number of queries received recently from financial market participants and the media about cryptocurrencies gaining popularity worldwide.
The Bank of Russia and concerned federal government bodies are monitoring the cryptocurrency market and working out approaches to defining and regulating cryptocurrencies in the Russian Federation.
As in most countries, the majority of cryptocurrency transactions in the Russian Federation are conducted outside the scope of official legal regulation. Cryptocurrencies are neither guaranteed nor supported by the Bank of Russia.
Cryptocurrencies are issued by an unlimited range of anonymous persons. Due to the anonymous nature of the issue of virtual currencies, individuals and legal entities may become involved in illegal activities, including the legalisation (laundering) of criminally obtained incomes and the financing of terrorism.
Cryptocurrency transactions imply high risks both during exchange transactions (caused, among other things, by sharp exchange rate fluctuations) and when funds are raised via ICO (Initial Coin Offering is a form of raising private investment by way of the issue and sale of new cryptocurrencies/tokens to investors). There are also technological risks associated with cryptocurrency issue and circulation, and the registration of rights to virtual currencies. These may lead to financial losses among the general public and make it impossible to ensure financial consumer protection should their rights be violated.
Given the high risks inherent in cryptocurrency circulation and use, the Bank of Russia believes it is premature to allow cryptocurrencies as well as any financial instruments denominated in, or linked to, cryptocurrencies to circulate or to be used in organised trading and in the settlement and clearing infrastructure in the Russian Federation to service transactions in cryptocurrencies and in cryptocurrency-based financial derivatives.
In view of the above, the Bank of Russia urges individuals and all financial market participants to pay attention to enhanced risks associated with the use of, and investment in, cryptocurrency.
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