At a meeting on Tuesday, Vladimir Putin told a roomful of Russian financial officials that “the use of cryptocurrency bears serious risks”. The alleged “risks” include (but are not limited to) money laundering and funding of terrorism.
In the same meeting, Sergei Shvetsov, first deputy director of Russia’s central bank announced that the Russian government would begin blocking access to online cryptocurrency exchanges. Shvetsov added that the Russian government “think[s] that [cryptocurrency] is a pyramid scheme.” While the date that the ban will go into effect is unknown, the RBC has partnered with a special prosecutor’s office to institute it.
Despite this announcement, several Russian-based cryptocurrency ventures are continuing undaunted (at least so far). Dminitry Marinichev, internet ombudsman and president of Radius Group, recently raised US$43 million in an ICO that would fund a Russian cryptocurrency mining “mill”. Additionally, Russia’s largest bank (Sberbank) is considering opening cryptocurrency-based accounts within its Swiss branch.
The Domino Effect: Crypto Bans Sweep Through the East
When China initially announced its ban on ICOs (soon to be followed by bans on cryptocurrency exchanges), the price of Bitcoin tumbled from nearly US$5000 to a two-month low of just below US $3000. For the next several weeks, it sat comfortably around US$4400.
Oddly, Russia’s announcement seems to have had the opposite effect. Within the last 24 hours, Bitcoin has smashed through the US$5000 mark, and is now sitting comfortably above US$5200. It does make sense that Russia’s announcement would have little effect on the price of Bitcoin because Russian Bitcoin trading accounts for such a small percentage of the global Bitcoin market. However, having a seemingly positive effect on the price is, nevertheless, rather odd.
Something similar happened several weeks ago when South Korea announced a ban on ICOs–the price of Bitcoin just continued its steady climb.
On the one hand, the period of regulatory measures being placed on Bitcoin and on cryptocurrency in general is just beginning. Market fluctuations are sure to follow–undoubtedly, there will be many “red” moments ahead. In the short-term sense, new regulations from various countries around the world may have a negative effect on the price of Bitcoin.
In the long-term sense, however, regulations that are placed on cryptocurrency tend to net a positive effect on coin valuations. This is because many hesitant investors see the regulations as legal protection from the risks associated with investing in cryptocurrency.
This hesitance makes a lot of sense. There are plenty of opportunities to make money by investing in cryptocurrency, and with those opportunities come plenty of people who see an opportunity to take advantage of hopeful individuals. There have been plenty of examples of ICOs for “pump-and-dump” schemes as well as entirely fake coins and multi-level-marketing schemes.
When Japan passed its Virtual Currency Act earlier this year, the price of Bitcoin and Ethereum skyrocketed. Many analysts have connected the dots between these two events; it seems that the pattern of regulation to legitimization to increase-in-valuation will continue.
Billionaire Mike Novogratz, former Wall Street royalty, has predicted that Bitcoin could reach close to US$10,000 as soon as early 2018. It’s also true that crypto regulations are currently being passed through the governments of India, the United States, and the European Union.