Bank of Russia Issues Warning on Digital Currencies

| Published on January 27, 2014 at 18:04 BST | Europe, News, Regulation

Recent sub-zero temperatures may have paralysed parts of Eastern Europe, but they haven’t done much to slow down the Bank of Russia, the country’s central bank.

On Monday, the bank issued a statement on the use of digital currencies. It resembled similar warnings issued by regulators in Asia and Europe over the past few months, so the pattern is very familiar.

The bank points out that these currencies aren’t backed by a state entity, that they are speculative in nature and that trades are carried out on virtual exchanges are “high risk”. The statement goes on to warn citizens and businesses, especially financial institutions, about the risks associated with digital currencies like bitcoin.

In addition, the bank warns that issuing alternative currencies in the Russian Federation is prohibited:

“According to Article 27 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ issuing monetary surrogates is prohibited in the Russian Federation.”

The central bank also pointed out that the anonymous nature of digital currencies, and the unlimited range of actors who use them, could lead some people to break the law unintentionally, as they could unknowingly aid those who use such currencies for money laundering or even terrorism.

Involvement in such transactions and exchange services will be considered as “potential involvement in the implementation of suspicious transactions” in accordance with existing legislation on money laundering, as well as counter terrorism legislation.

The warning will no doubt leave many Russian bitcoin enthusiasts scratching their heads. It comes just days after Sberbank CEO German Gref publicly backed digital currencies in Davos, saying they are an interesting global experiment and that an outright ban would be a “colossal mistake”.

Sberbank is owned by the Bank of Russia, which makes the timing of the statement rather odd to say the least – it sounds rather like a case of damage control.

Saint Basil’s Cathedral Image via Shutterstock

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