Crypto Is No Risk for Global Financial Stability, Russia's C-Bank Says

Digital currencies should be called ‘crypto assets’, according to a recent report.

by Kalina Tekelieva
31 May • 2 min
In News

Cryptocurrencies do not threaten financial stability on a global scale due to their low overall transaction volume, the Central Bank of the Russian Federation said in a financial review on Wednesday.

At the end of 2017, the crypto market represented only around 0.36% of the world’s gross domestic product (GDP), according to the International Monetary Fund (IMF). The Russian central bank therefore concluded that although virtual currencies experience high volatility, their relation to the financial sphere is limited and thus, they pose little risk to global financial stability.

What name for cryptocurrencies?

In its report on Q4 2017-Q1 2018, the Bank of Russia discussed as well the appropriate way of referring to virtual currencies. It accepted the term ‘crypto assets’ proposed by the Financial Stability Board (FSB). The reason for not calling them ‘currencies’ is because they do not perform the basic functions of money and since high volatility makes them an unreliable measure of value, the bank explained.

In this context, ‘crypto assets’ encompasses both virtual coins and tokens.

Notably, last Thursday, Russia’s central bank governor Elvira Nabiullina named digital currencies ‘crypto things’. She said in an interview for TV channel Russia-24 that the crypto phenomenon is not fully understood yet and stressed on the risks connected with the price volatility and the potential use of virtual coins for criminal purposes.

Last week, South Africa’s central bank called cryptocurrencies ‘cyber-tokens’, not currencies, claiming digital coins do not “meet the requirements of money”. Russia and South Africa are partners in the BRICS union of the five major emerging national economies, including also India, Brazil, and China.

Crypto market regulation

Russia has already set out to develop a legal framework for cryptocurrencies. On May 22, the parliament’s lower house, State Duma, approved the first reading of a bill seeking to regulate digital financial assets. According to the bill, digital financial assets are not legal methods of payment in Russia, but traders can exchange tokens for Russian rubles and other foreign currencies through legally established exchange operators.