The Bank of Russia, the country’s central bank, released a new statement Tuesday (Sept. 5) highlighting the risks associated with cryptocurrencies and initial coin offerings (ICOs).
According to a news report in CoinDesk, the Bank of Russia was prompted to issue the statement due to the rise in interest in ICOs, as they are being covered more frequently by the media. With ICOs, digital currency coins are sold to investors. The report pointed out that ICOs are so popular that an aide to Russia’s President Vladimir Putin said he will hold his own ICO.
The statement from Russia’s central bank says there are “high risks” associated with exchanging cryptocurrencies and by participating in ICOs. What’s more, it said it would not allow any cryptocurrency trading on a official exchange in the country. It also won’t approve the use of the technology behind digital currency for infrastructure uses, noted the report.
“Given the high risks of circulation and use of cryptocurrency, the Bank of Russia considers it premature to admit cryptocurrencies, as well as any financial instruments nominated or associated with cryptocurrencies, to circulation and use at organized trades and in clearing and settlement infrastructure on the territory of the Russian Federation for servicing transactions with cryptocurrencies and derivative financial instruments on them,” the translated statement read, according to CoinDesk.
Russia isn’t the only government warning about the risks associated with ICOs. China earlier this week placed an immediate ban on funding of those offerings. TechCrunch reported that the nation’s central bank said ICOs have “disrupted the economic and financial order.”
The order comes as the controversial fundraising activities for bitcoin blockchain have drawn attention and no small share of scams. The industry itself, said CNBC, is worth hundreds of millions of dollars. The order, as noted by Chinese language financial news site Caixin, was handed down by a committee studying internet-based financial risk, which offered up a list of 60 exchanges that will be inspected and reported on. The freeze remains in place until then.
Further, seven government administrations said jointly that the ICO exists as an unauthorized fundraising effort that may, in fact, be tied up in scams. The roster of government entities issuing that statement included the People’s Bank of China and the China Banking Regulatory Commission, among others.
The statement also warned that financial institutions should not be involved with ICO trading activity of bitcoin blockchains. Individual investors and firms that have completed ICOs and raised funds should get ready to give those funds up, per the statement, as CNBC noted.
The ban takes effect as ICOs have raised more than $1 billion globally this year alone, with $400 million coming from China. As has been widely noted, startups have been able to raise significant amounts of money against a lightly regulated landscape.