Russia and the curious case of crypto
- Bitcoin dropped by 13% over the last 5-days amid tensions between Russia and Ukraine.
- Bitcoin is no longer a ‘safe-haven’ as digital currency falls in step with the broader market.
- Central Bank of Russia and Russian Ministry of Finance face-off over cryptocurrency legalisation.
Russia has officially declared war on Ukraine this week which sent investors scrambling out of risky assets like cryptocurrency and tech stocks and into safe havens like gold and government bonds.
The conflict between Russia and Ukraine sees tensions rising between the US and Russia, sparking investors to enter risk-aversion mode.
Formerly referred to as safe-haven asset ‘digital gold’, bitcoin has, in recent times, been fluctuating more in-line with traditional markets like equities as more institutional investors jump on the bitcoin bandwagon.
So what impact will Russia’s war with Ukraine have on crypto?
Russia’s two powerful parties in finance; the Bank of Russia and the Russian Ministry of Finance are butting heads when it comes to cryptocurrency.
Just a day before officially declaring war on Ukraine, the Russian Ministry of Finance proposed the ‘On Digital Currency’ law which would be the country’s first draft bill on the regulation of bitcoin and other digital currencies.
The new law will see the regulation of cryptocurrency use, investment and mining in Russia.
However, the proposed new law stops well short of the Bank of Russia’s hope to ban crypto mining and trading.
Instead, the Bank of Russia has been working on its central bank digital currency (CBDC), the digital ruble, which it aims to use for traditional trade directly with other countries willing to accept it.
If passed, the new ‘on digital currency’ law could establish a world-first regulatory blueprint on crypto and see crypto activity fast-tracked in the country, whilst the expansion of bitcoin into a sizable new market also presents opportunities.
While some bitcoin analysts believe the next bitcoin bull run is unlikely to take place until at least 2024 when the next ‘halving’ event is due, Russia’s internal battle between bank and ministry may influence crypto investor movements for a little while to come.
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