Russia has recorded one of the highest cryptocurrency transaction volumes in the world.
The country has become one of the top leaders in terms of visits to leading cryptocurrency exchange Binance.
However, the Bank of Russia is sounding alarm bells regarding the risks associated with digital assets as adoption of the new asset class rises.
Citizens in Russia are among the world’s most active participants in the digital asset market. The Bank of Russia estimated that total volumes of cryptocurrency transactions have reached $5 billion per year.
The Bank of Russia recently published a review of financial stability on its $2.8 trillion market. Major local banks reported that as of July 2021, the total annual volumes of digital asset transactions in the country reached $5 billion.
The central bank further noted that the country is among the top leaders in terms of visits to cryptocurrency exchange Binance.
Russia is also one of the world’s largest Bitcoin mining countries and has taken third place, according to national hash rates data from the Cambridge Bitcoin Electricity Consumption Index in August 2021.
Despite the country’s growing adoption of the new asset class, the Bank of Russia is concerned with significant risks associated with the cryptocurrency market, including threats to financial stability, investor protection, money laundering and criminal financing.
The central bank stated that it would closely monitor the market to pin down potential threats associated with digital assets. The report noted that the relationship between cryptocurrencies and the financial sector “remains limited at the moment.”
However, since the industry has witnessed rapid growth, the report added that the new asset class could pose bigger risks for the country as well as the rest of the world.
While cryptocurrency trading was legalized at the start of 2021, the government has not allowed local banks to offer digital asset services. Local banks that are willing to offer crypto trading services have been restrained by Bank of Russia’s policies.
Although cryptocurrencies were declared “allowed” in Russia, the new asset class is not considered legal as an exchange for goods and services. Citizens can continue to mine, trade and hold digital assets.