MOSCOW, January 20. /TASS/. The proliferation of cryptocurrencies might pose severe threats to the economic system and the monetary sector, in accordance with the Financial institution of Russia’s report titled “Cryptocurrencies: Developments, Dangers, and Measures”.
“If this market continues to develop and banks and different conventional market gamers get closely concerned, there’s a likelihood that monetary intermediaries will likely be uncovered to cryptocurrency-specific liquidity dangers in addition to market and credit score dangers, that are typical for cryptocurrencies,” the Central Financial institution contended.
On the similar time “the interconnectedness of enormous monetary establishments might assist unfold such dangers to a wider vary of market gamers and to the true economic system. Thus, if cryptocurrencies had been to proliferate, it might pose vital threats to the economic system and the monetary sector,” the Financial institution of Russia cautioned.
The regulator identified that additional use of cryptocurrencies as a method of fee for items and repair would carry the danger of undermining the circulation of cash and the sovereignty of the nation’s foreign money.
“The issue [with the proliferation of cryptocurrency] is much like the issue of international foreign money predominance (development in money, deposits in international foreign money or investments in international securities), which is primarily typical for rising markets,” the Central Financial institution defined.
Furthermore, the predominance of international foreign money or cryptocurrency implies that the impact of the Financial institution of Russia’s financial coverage will likely be very restricted, and the inflation fee will likely be always elevated.
Based on the Russian regulator’s estimates, as a result of anticipated outflow of capital from the standard monetary system to the cryptocurrency market, there’s a danger of a lower in funding for the true sector of the economic system.
“The outflow of funds from conventional securities (shares, bonds) to cryptocurrencies will result in a drop within the capitalization of the Russian inventory market and restrict the flexibility of issuers to draw investments. This can negatively affect the economic system’s growth, cut back the potential development fee of residents’ incomes and enhance unemployment,” the regulator notes.
Furthermore, from a balance-of-payments perspective, a large buy-up of cryptocurrency by the inhabitants would entail an outflow of capital from the nation and the ruble’s weakening.