Russia turns cold on cryptocurrencies

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President Vladimir Putin said on Tuesday cryptocurrencies were risky and used for crime, as Russia’s central bank said it would block websites selling bitcoin and its rivals – a change of tone from a month-old promise to legalize the market.

Central Bank First Deputy Governor Sergei Shvetsov told a conference in Moscow that the currencies were “dubious” and investors needed to be protected.

“We cannot stand apart. We cannot give direct and easy access to such dubious instruments for retail (investors),” Shvetsov said.

Russia's pronounced shift in its stance on crytpocurrencies comes little more than a month after China, previously one of the world's top bitcoin markets by trading volume, issued a ban on Initial Coin Offerings, a form of crowdfunding through cryptocurrency.

China's central bank and other ministries ordered exchanges to halt trading by the end of September, leading to a significant plunge in the currency's trading volumes.

Putin told reporters on Tuesday that cryptocurrencies could be used to launder money, evade taxes and finance terrorism.

“The usage of cryptocurrencies carries serious risks. I know the central bank’s position on that,” Putin said.

“Cryptocurrencies are issued by an unlimited number of anonymous bodies. Thus buyers of cryptocurrencies could be involved in unlawful activities,” Putin said.

Russian financial authorities initially treated any sort of money issued by non-state approved institutions as illegal, saying they could be used to launder money.

But Finance Minister Anton Siluanov said last month that the authorities had to accept that the virtual currencies existed.

“There is no sense in banning them, there is a need to regulate them,” Siluanov said in September, adding that his ministry was working on a law including registration of those willing to buy the virtual money.

On Tuesday, Shvetsov told a conference on financial market derivatives in Moscow the central bank sees rising interest in cryptocurrencies because of high returns to date.

He said they gradually transformed into high-yielding assets from being means of payment.

Bitcoin, the most well-known virtual currency that emerged in mid-2010, last traded at around $4,807 BTC=BTSP, up from its initial price of less than $1.

“We think that for our citizens, for businesses the usage of such cryptocurrencies as an investment object carries unreasonably high risks,” he said.

Russia represents the world's 11th largest bitcoin market by trading volume accounting for less than one percent of the global market share, according to database CryptoCompare.

Source(s): Reuters