Home Latest Buying Bitcoin is like entering a minefield, Bank of Russia exec says

Buying Bitcoin is like entering a minefield, Bank of Russia exec says


The Central Bank admits that it is unable to protect the interests and limit the risks of citizens who purchase Bitcoin via the Internet from foreign providers; but allows the introduction of testing when they purchase digital financial assets issued in the Russian jurisdiction.

“Buying the same Bitcoin, a person enters a minefield; where, besides himself, he has no one to rely on and no one can protect him. We also tell the citizens about this that you do not need to go where you are not under the protection of the Russian Federation; where your money will simply be taken and you cannot do anything about it, ”said the first deputy chairman of the Central Bank Sergei Shvetsov in an interview with Reuters.

Bitcoin, the world’s largest digital currency, is showing strong volatility: it reached a historic high in April at $ 64.9 thousand; and traded below $ 30 thousand in July, today it is worth slightly above $ 46 thousand.

Buying bitcoin – loss of money

“Quite a lot of people are investing in alternative instruments; which we call financial pyramids or technological financial pyramids like Bitcoin,” Shvetsov said.

“Ordinary people, in anticipation of frenzied profitability, very often either sell their property or mortgage it and borrow it from relatives in order to bury their money in the “field of miracles”. It is a big, big trouble that our citizens are not familiar with the rules of the capital market; where the promised profitability reflects the level of risk. And if you want to earn many, many percent for this money; then the probability that you will lose everything is enormous”, he added.

According to him, the Central Bank is actively conducting explanatory work so that Russians are very careful about assets for which there is no collateral.

“A particularly difficult life situation is just for those people who invest not on their own funds; although they are also, of course, sorry to lose, but on borrowed funds. Because they get a double negative effect – they have lost money, and they owe it”, Shvetsov said.

Country unable to protect its citizens?

Answering the question why the Central Bank did not introduce testing for understanding the risks when buying cryptocurrencies; Shvetsov said: “What we see on the market now are extraterritorial instruments. Russian brokers simply do not provide access to cryptoassets, citizens use the Internet. In this sense, it is not very clear who will conduct the testing; and we, unfortunately, do not have the ability to protect our citizens when they purchase products from foreign providers”.

“We still have the authority to work with those who have issued a license. If a person, at risk, uses the services of other providers that have not licensed by the Central Bank; then we have no way to protect him; there is no way to introduce the very mechanisms that are aimed at protecting his interests and preserving his money”, he added.

The Central Bank reported that it would be able to restrict payments through banks and payment systems to companies in which the regulator found signs of illegal activity. “We initiate the closure of sites, banks stop payments. But there are other channels that appear very quickly, where a person cannot be helped. For example, if he has an account with bitcoins and the pyramid collects bitcoins. There is no way to block the transfer from his account to the account of the financial pyramid in Bitcoins”, Shvetsov said.

Testing digital financial assets

After the launch of testing of unqualified investors in the securities market from October 1, 2021; the Central Bank was going to develop approaches to testing in the digital financial assets market.

“We are talking about digital assets that will be issued by Russian companies and under Russian law. The current regulation speaks of a limit on investments through such digital asset platforms. We borrowed this system from our foreign colleagues – there, too, the risk of an unqualified investor is limited through limits”, explained Shvetsov.

The Central Bank wants to see how testing works for classic financial instruments; and, possibly, introduce tests for digital assets issued in the Russian jurisdiction. “Testing and certification is a more effective method of informing citizens about the risks that investments in these assets carry than limits”, Shvetsov said.

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