• A fresh review from the central bank of Russia shows the country is a major player in the crypto industry, with over $5B in annual crypto transactions.
• The nation has a number of strict policies against digital assets, but its crypto industry continues to thrive.

Russia now hosts one of the most active players in the $2.8 trillion cryptocurrency market, according to its central bank.

A Thursday review from the Bank of Russia shows the total annual volumes of crypto transactions amongst the nation’s population now amount to 350 billion rubles ($5 billion). The figure follows estimation by major local banks in July 2021. It is, however, unclear whether the bank took into consideration that the price of Bitcoin doubled from $30K in July to $60K in November.

Additionally, the report notes that the Russian Federation is among the top worldwide visitors of the Binance cryptocurrency exchange. Russia produces the second-largest traffic on Binance after Turkey, based on data from digital intelligence provider SimilarWeb.

Russia and cryptocurrencies

Moreover, the central bank says the country is among global leaders in terms of Bitcoin mining. The nation ranks third globally per national hash rates, according to the Cambridge Bitcoin Electricity Consumption Index of August 2021. Late last month, Russian authorities proposed using the nation’s rich oil equipment to mine the digital asset.

Read more: Russian authorities propose Bitcoin mining using the nation’s rich oil equipment 

Overall, the bank highlights heightened investor interest in technology including blockchain, smart contracts, decentralized finance (DeFi), and stablecoins.

But even then, the report still warns of major risks associated with the crypto industry. These include financial instability, poor investor protection, money laundering, criminal financing, and ESG (environmental, social, and governance) risks. Bank of Russia does not outline any measures to mitigate these risks. Instead, it says it will closely monitor the market to identify potential threats.

The relationship between digital currencies and the financial sector remains limited at the moment. However, the rapid growth and the widespread adoption of digital currencies would pose higher risks both globally and for the Russian financial market.

Stringent stance on cryptocurrencies

Bank of Russia is known for its unrelenting nay say of cryptocurrencies. Governor Elvira Nabiullina has even argued that responsible governments need to steer away from crypto adoptive policies. Earlier this year, the central bank warned its citizens to stay clear of digital assets. Crypto is risky especially for unprepared investors, according to the bank.

Read More: Russia to introduce new laws that allow the government to confiscate cryptocurrency

Even more, the central bank forbids local banks from dealing in digital assets, promoting its digital currency instead. This means that no crypto exchange in Russia is operating legally. Such a situation has prompted the halting of operations by numerous exchanges in the country.

Sergei Khitrov, the founder of the Russian crypto event Blockchain Life and Listing, noted late last month that the nation has attempted to bring in big crypto businesses but has failed to meet their demands. This, however, has not deterred the growth of Russia’s crypto market to hundreds of billions of dollars.