Cryptocurrencies: a safe haven asset or a risk magnet?
A special session at the 11th Gaidar Forum held at the RANEPA was devoted to the discussion of relevant aspects of the cryptocurrencies functioning. The continued growth of crypto assets and the leading central banks' plans to issue their own digital currencies require a thorough analysis of the potential risks and benefits of their use in modern economies.
During the session "Digital Currencies: Potential Risks and Benefits", experts discussed the potential of cryptocurrencies as investment instruments, the competition that exists between them, the implications of digital currencies creation by central banks for the existing banking and financial system, and the use of digital currencies for crowdfunding.
"The consequences of digital currencies issuing by central banks may vary significantly depending on the population’s habits of using different payment and settlement methods," said Elena Sinelnikova-Muryleva, senior research fellow at the Center for the Central Banking Study of the RANEPA. In particular, in times of financial instability, the central banks' digital currencies may become a safe haven asset, provoke an uncontrolled outflow of funds from commercial banks and put the banking system at risk.
Having reviewed the legal regulation of digital currencies in various countries, the head of the Russian Center for Competence and Analysis of OECD Standards at the RANEPA Antonina Levashenko stated that "there is and will be cryptocurrency, such is the policy of most developed countries." This position of the authorities is explained by the fact that digital currencies allow creating new financial instruments that have a stabilizing effect on the market due to greater understandability and accessibility for consumers.
Elizaveta Danilova, director of the Financial Stability Department at the Bank of Russia, focused on potential risks. A serious drawback of the first generation of cryptocurrencies was their high volatility. "This is really a too speculative tool. It should be noted that new projects – stablecoins, digital currencies of central banks – are devoid of this drawback," said Elizaveta Danilova.
She also emphasized the role of digital currencies as an alternative to the US dollar, whose dominance in the global financial system entails enormous risks. "The emergence of a digital currency available to economic agents around the world would reduce the dominance of the dollar and the negative impact of the US financial system," said Elizaveta Danilova.
Deputy Director of the Financial Policy Department of the Ministry of Finance of the Russian Federation Alexei Yakovlev focused on the upcoming draft federal law regulating the legal status of digital currencies. "Our work is based on the instruction of the President, where the task was to provide a definition, to work out regulation, but the main thesis is that the ruble is the main legal means of payment. This position remains unchanged," said Alexei Yakovlev.
The 11th Gaidar Forum "Russia and the World: Challenges of the New Decade" is being held at the Presidential Academy on January 15 and 16, 2020. The forum is focused on the goals of national and global development and the search for practical answers to the most pressing challenges of our time. The forum is attended by ministers of the Government of the Russian Federation, members of the Federal Assembly, governors of the Russian regions, prominent international experts, and representatives of foreign states.
The organizers of the 11th Gaidar Forum are the Russian Presidential Academy of National Economy and Public Administration, the Gaidar Institute for Economic Policy, and the Association of Innovative Regions of Russia.
The title partners of the Gaidar Forum are Gazprom PJSC and Gazprombank JSC. The strategic partners are Coca-Cola, Mastercard, Russian Railways, Pharmstandard group of companies, Johnson & Johnson, Sanofi, Novartis group of companies, MSD, AKIG group of companies, EF Education First. Partners are Prosveshchenie group of companies, EY, Huawei, RVC JSC, Russian Agricultural Bank JSC.
The title information partners of the Gaidar Forum are the Russia-24 TV channel, TASS, RBC, Business FM. The strategic information partners are Kommersant Publishing House, Interfax, Rossiyskaya Gazeta, Invest Foresight magazine, Federal Press Agency. The main information partners are Anews.com, Gazeta.Ru, Lenta.Ru, News.ru, Profile. International partners are RT, ThomsonReuters, Sputnik, EFE, Cision, Pan Pacific Agency. Information partners are Snob media project, AEI PRIME, RNS, Expert magazine, Parlamentskaya Gazeta, Polit.ru, Ekho Moskvy radio station, PRO Business TV channel, FINAM.RU information and analytical agency, Davydov.Index, Strategiya magazine, Ekonomika i Zhizn newspaper, Econs portal, Gosudarstvennaya Sluzhba magazine, TV BRICS.