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Cryptocurrency holdings concentration in Russia offsets risks for the national financial system

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Cryptocurrency holdings concentration in Russia offsets risks for the national financial system

Release date: 22 June 2018

Topics:

Monetary policy

Financial market

Cryptocurrencies

Cryptocurrencies perform none of the money functions in full scope yet. Volatility in crypto markets is high and comparable to price movements in the food commodities (the most volatile of all markets), which disqualifies cryptocurrencies as a means of payment According to ACRA estimates, market value of the cryptocurrency attributable to the economy of the Russian Federation and held by residents in Russia amounted to USD 7.5–14 billion, or 1–2% of M2 money supply, in 1Q2018. In addition, the entire volume is held by a small number of owners, which offsets the risks for the Russian financial system. If cryptocurrencies were as popular among Russian residents as foreign currencies, the volatility demonstrated by cryptocurrencies would affect the Russian economy’s stability. ACRA indicates both stimulating and deterrent growth factors for the share of cryptocurrency in Russia.


Typical volatility of the cryptocurrency exchange rates can periodically provoke an increase in the rate of interest on domestic borrowings by 1%, if the amount of the cryptocurrency in the debt profile of residents being legal entities and individual entrepreneurs reaches RUB 4 billion.


With the widespread of cryptocurrency, the Central Bank of the Russian Federation can use the same monetary instruments as for foreign currencies. The cryptocurrency for the Central Bank of the Russian Federation, if transactions with it are not transparent enough, will serve as the equivalent of a cash foreign currency, with the possibility of tracking non-cash foreign currency. The spread of cryptocurrencies has not yet reduced transaction costs in the economy.


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