Russia Delivers a Scathing Setback to Crypto

The crypto industry is currently going through an unprecedented crisis that any further setbacks can deepen.

Hardly a week goes by without the young crypto industry receiving some bad news.

The industry is currently playing a guessing game which consists of trying to guess which crypto company or crypto platform is next to be impacted by the liquidity crisis affecting prominent crypto lenders like Celsius Network, Voyager Digital and BlockFi. 

This cash crunch crisis comes from the fall in cryptocurrency prices that led to a collapse of more than $2 trillion in the crypto market since November. The damages are substantial. Celsius and Voyager have filed for Chapter 11 bankruptcy and their customers don’t even know if they will be able to get their money back. 

Other platforms like Babel Finance, CoinLoan or CoinFlex have suspended withdrawals, thus preventing their customers from having access to their funds. BlockFi was bailed out by cryptocurrency exchange

Another difficulty for the sector is how to bring back retail investors, many of whom fled the crypto sector after suffering colossal losses? Some investors even lost everything following the crash of sister tokens Luna and UST in May. Three Arrows Capital, also known as 3AC, a crypto hedge fund was forced into liquidation.

As if that were not enough, bad news has just arrived from Russia. Indeed, President Vladimir Putin has just signed a tougher law against cryptocurrencies after it was passed by the Russian National Assembly or Duma on July 8.

This law banned any payment for assets, goods, products and services with digital means or any utility tokens. It is the latest legal arsenal adopted by Moscow to prevent cryptocurrencies from being used as a means of payment. 

Crypto and Sanctions

The Minister of Finance Anton Siluanov had introduced a draft On Digital Currency in parliament for regulation of the sector in February. 

The Russian government, however, didn’t follow the recommendation of the Central Bank of Russia, which called in March for an outright ban on cryptocurrencies and the entire crypto industry in the country. The institution recommended a ban on trading, mining, and paying for goods and services with cryptocurrencies.

The Russian war in Ukraine may play a big role here. In the face of NATO sanctions, there has been a surge of interest in how Russia might use cryptocurrencies to sidestep sanctions. Selected Russian banks were disconnected from the SWIFT, a secure messaging system used by financial institutions, brokers, and investment firms.

Russia’s economy has suffered under the sanctions with the ruble’s value plummeting. 

According to government figures, it is estimated that Russian citizens’ crypto holdings stand at approximately 2 trillion rubles, or nearly $26 billion.

The crypto industry for its part has raised tens of millions of dollars for Ukraine and Ukrainians invaded by Russia.

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