Russia's Central Bank warns of ICO and cryptocurrency risks: Too early to endorse cryptocurrencies

The Central Bank of Russia has issued its latest statement on the risks of cryptocurrencies and ICOs (initial coin offerings).

Yesterday’s announcement by the Russian Central Bank appears to be a response to the high profile of ICOs (the process of selling blockchain cryptographic tokens through crowdfunding) and cryptocurrencies that have been making frequent appearances in Russian news media. Indeed, even aides to Russian President Vladimir Putin have talked about launching an ICO.

The advisory noted the “high risks” of trading cryptocurrencies and participating in initial coin offerings (ICOs), which the central bank described as “a form of attracting investment from the public.”

The central bank said that at this stage they will not allow any official exchange to trade cryptocurrencies, nor will they approve the use of blockchain to build infrastructure. At the same time, the Russian Central Bank also clarified that it is not a financial regulator; financial supervision responsibilities should be borne by the State Duma (lower house) and the Ministry of Finance.

The Central Bank of Russia said:

In view of the high risks involved in the circulation and use of cryptocurrencies, the Central Bank of Russia believes that the time is not yet ripe to recognize cryptocurrencies and other financial instruments related to cryptocurrencies. The circulation and use of cryptocurrencies in organized transactions are currently not realistic, and the Central Bank will not allow clearing and settlement institutions within the Russian Federation to provide cryptocurrency trading and its financial derivative instrument services.

The announcement comes as China has begun taking action against ICOs, with the government banning them and imposing strict controls on exchanges that offer such tokens for sale. ICOINFO suspended operations on its platform last week and plans to return or refund users this week.

Hong Kong’s securities regulator also recently issued a statement defining ICOs, deeming some tokens securities and falling within its regulatory scope, which is similar to the stance taken by Singapore, Canada and the United States in recent weeks.