Russian Analytic Credit Rating Agency (ARCA) has come out with its conclusion that the country is yet to see the traction of digital currency like that of money. That meant that digital coin could not be used as a means of payment. Naysayers of digital currency will cheer this news and the importance given to it currently. This could also come in handy for pessimists to point out the reality of the virtual currency even as the regulators are tightening their noose around the market.
Does Not Perform Fully
The Russian rating agency pointed out that the digital currency does not perform fully any of the functions of money currently. One of the primary reasons for its failure is the too high exchange rate volatility that is comparable with the food prices volatility. Therefore, the agency has concluded that it would be tough to enable the virtual currency to be as efficient as money for payment means, cointelegraph reported. However, this cannot be taken at the end of the road. That is because of the hopes that once the regulatory tightening process is over, there would be resetting of the market.
Another key factor brought by the report is the costs involved in the use of cryptocurrency. The agency is categorical that the usage of any virtual currency does not reduce the costs of the transaction in the economy. This was mainly due to its inefficiency in energy and the lack of economies of scale in the cybersecurity provision. Aside from these, the low speed of entries in the register also increases the cost of transactions. As a result, the value of any possible advantage in the intermediaries in settlements gets reduced.
The report also brought out another key factor of comparing digital coins with that of fiat currencies that has its own intrinsic value. As far as the cryptocurrency is concerned, its market value is established mainly on investors’ expectations to sell the virtual coins at a higher price in future. On factors to boost the digital coin usage, the report wanted “toughening of sanctions against the backdrop of growing foreign policy and external economic tensions.”
Interestingly, during a live question and answer with the public yesterday, the Russian President Vladimir Putin, spoke about the negative side of the virtual currency though ambiguously. However, he promised to see as to how cryptocurrency could be used to escape sanctions in the international financial activity. This is an obvious reference to the Western sanctions that are currently in place.
Unlike To Be Widespread
The rating agency expressed its doubt on the widespread use of digital currency in Russia. Its contention is that it involves high investment risks apart from the tough approach to regulation by the regulator and the lack of readiness among the companies to accept the virtual currency as payment means in return for the services and goods.
Aside from these things, there is also lack of guarantee for the fund’s safety. Incidentally, the country’s crypto and the blockchain-associated bill were approved nearly unanimous in its first reading in May end. The final version is scheduled to be passed before July 1.