Tuesday, October 10, 2017

Russian central bank seeks to outlaw cryptocurrency exchanges and calls Bitcoin a pyramid scheme

Bitcoin owners saw a plethora of volatility over the past couple of days as the cryptocurrency experienced both a flash crash, and a recovery to near its all-time highs.  And the catalyst for one of these moves was news from Russia's central bank calling Bitcoin a pyramid scheme, and seeking guidance to have all online exchanges banned or outlawed.

The Central Bank of Russia has suggested banning access to bitcoin and other cryptocurrency exchange websites in the country. The officials say digital money is a financial pyramid which is prohibited in Russia. 
The BRICS countries (Brazil, Russia, India, China and South Africa) have agreed a cryptocurrency is a tool without a legal definition, which has an ambiguous economic nature and does not allow regulators to protect investors, according to First Deputy Governor of the Bank of Russia Sergey Shvetsov. 
“We have seen how bitcoin has transformed from a payment unit into an asset, which is bought in order to obtain a high yield in a short period of time. This is a definition of a pyramid,” he said. 
Even those who have significant investments in bitcoin admit that there is not much money in the system, it has low liquidity, and it is almost impossible to get out of the system. 
Shvetsov said that in Russia there is a procedure for blocking access to sites which encourage investment in financial pyramids. He admitted there are a lot of them, and the process is not easy. 
"There is a permanent job of blocking malicious sites that involve Russian citizens in financial pyramid schemes. Everything that contradicts or violates Russian law, or creates unfair competition, will be limited," he stressed. 
Russian authorities said earlier this year they would like to regulate the use of cryptocurrencies by Russians by limiting access by the general public. – Russia Today
Interestingly, Bitcoin has not made a great deal of headway into Russia as the majority of trades that take place on the exchanges occur in three primary markets (South Korea, China, Japan).  And since the Russian financial system has both stabilized the Ruble, as well as paid off nearly all of their debts, a replacement for their sovereign currency isn't as important as it is in places like Japan, the EU, and Venezuela.


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