Russia’s Central Bank Is Also Skeptical of Cryptocurrency

Updated on
  • Central bank not convinced digital currencies are a good idea
  • JPMorgan CEO Dimon says bitcoin ‘worse than tulip bulbs’

Elvira Nabiullina at the 15th International Banking Forum in Sochi on Sept. 14, 2017

Photographer: Artur Lebedev/TASS/Getty Images

Russia’s central bank shares JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon’s skeptical view of cryptocurrencies and initial coin offerings, signaling that not all Moscow authorities are convinced the new technology is a good idea.

Whether Russia should legalize cryptocurrencies remains a big question, Governor Elvira Nabiullina said Thursday at a banking congress in Sochi. At the same event, her deputy warned of a pyramid scheme, invoking China’s decision this month to issue a blanket ban on ICOs.

The comments had more in common with Dimon, who said Tuesday the bitcoin bubble was “worse than tulip bulbs,” than with Russia’s Finance Minister Anton Siluanov, who wants to regulate rather than restrict cryptocurrencies.

“China doesn’t recognize cryptocurrency as payment and forbids ICOs,” Bank of Russia Deputy Governor Dmitry Skobelkin told reporters Thursday, after meeting with Chinese central bank officials earlier in the week. “Our views are absolutely similar. In our view it’s a sort of a financial pyramid that may collapse at any moment.”

China Crackdown

The government in Moscow plans to legalize and regulate cryptocurrencies as securities, with a bill expected by the end of the year, Siluanov said last week. Enthusiasm for digital currencies has been growing since President Vladimir Putin met in June with Vitalik Buterin, the founder of the world’s second-largest cryptocurrency after bitcoin, and gave his blessing for Russia to develop blockchain, the technology underlying the instruments. Yet the Bank of Russia’s opposition could undermine any attempt to legalize the domestic market for cryptocurrencies.

In China, the central bank ordered an immediate halt to all fundraising efforts related to ICOs, which have raised at least $1.25 billion globally so far. The decision may have repercussions for investors who had participated in at least 65 of the projects by mid-July. Chinese regulators also decided to close domestic trading cryptocurrency platforms, Caixin reported, citing unidentified people close to the nation’s internet financial risk prevention team.

Despite the regulatory questions, some Russian cryptocurrency projects have been moving forward. A company co-owned by the president’s internet ombudsman, Dmitry Marinichev, has announced a plan to raise $100 million in an ICO to fund a domestic digital currency-mining operation. Sberbank PJSC, Russia’s largest bank, is studying the possibility of opening cryptocurrency accounts at its Swiss unit, Tass reported last week, citing the head of Sberbank CIB Igor Bulantsev.

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