Russia’s Central Bank Bans and Warns About Digital Currencies

Using harsh language, the Central Bank of Russia (CBR) has issued a statement on virtual currencies as well as specifically

Using harsh language, the Central Bank of Russia (CBR) has issued a statement on virtual currencies as well as specifically mentioning bitcoins.  According to the CBR, the issue of virtual currencies is illegal in Russia due to existing Federal laws governing the country’s monetary system.  In addition, the CBR issued a warning that virtual currencies are speculative and carry a high risk of loss.  They added that due to the anonymity of the currency, they can be used for prohibited actions such as money laundering and financing terrorism.  Based on the potential for illegal behavior, the CBR concluded its statement that Russian entities that provide services using virtual currencies will be considered to be suspicious of being involved with criminal and prohibited activity. 

Reacting to the news, prices of bitcoins on BTC-e have remained below $800 after falling below that barrier after reacting to the arrest of Bitcoin Foundation Vice President and Bitinstnat Founder, Charlie Schrem due to involvement with Silk Road.  However, over the longer term, the CBR news is expected to have a more meaningful impact on the price of bitcoins as a decrease of Russian involvement would lead to a decline in demand for digital currencies. In terms of immediate impact, the news could lead to a decline of Ruble denominated trading which had accounted for slightly above 2% of all transactions over the past 30 days at BTC-e, the world’s largest exchange for BTC/RUB trading.

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