Fitch issued a research paper on Russia’s proposed cryptocurrency prohibition on Friday. Although the research agreed with the Central Bank of Russia‘s (CBR) view that the ban would reduce the country’s financial system’s risk exposure, it also warned that such a plan could “slow the spread of technology that could boost productivity.”
Furthermore, Fitch issued the following cautionary statement:
“Assume that this inhibits the adoption of crypto-driven innovations. That, for example, use tokenization to increase payment speed and security or asset liquidity. In that event, it may erode this part of the Russian banking sector’s operational environment over time. Making it less competitive than peers.”
Fitch also remarked on Russia’s decision to adopt a central bank digital currency, or CBDC, noting that “[the digital ruble] should strengthen the authorities’ power to monitor and oversee financial flows, which may otherwise be eroded by the development of cryptocurrency transactions.” According to the source, one of the main reasons the CBR is considering stringent cryptocurrency regulations is to prevent competition for the upcoming CBDC.
Russia’s crypto regulatory climate, like India’s, has been a shambles recently. With authorities vacillating between outright bans on digital currencies and calls for a well-defined regulatory framework. At the same time, as reported by local news station rbc.ru on Friday, former Russian President Dmitry Medvedev shared his thoughts on the proposed crypto ban:
“I’ll be honest with you, when they try to outlaw something, it almost always has the opposite effect. However, the Central Bank’s viewpoint has its own set of considerations, which are well-known to all.”