Cryptocurrency exchanges have had a rough year with the collapse of the second largest crypto exchange, FTX, causing shockwaves throughout the hundreds of crypto exchanges. These times have revealed that many exchanges do not actually have enough funds to cover all client withdrawals, which makes a mass withdrawal of funds in a short period of time a very serious concern.
The Russian government has seen this solution and decided launching their own cryptocurrency exchange is a good option. This decision is perplexing as Russia announced they would ban cryptocurrencies in January 2022 before walking that back a month later by stating they would regulate cryptocurrencies.
Anyway, this article will cover the impact the Russian government launching a crypto exchange could have on the greater crypto marketplace.
Will The Russian Government Really Launch a Crypto Exchange?
Well, things are still in the beginning stages of this process. All that has happened at the moment is that the Duma, the lower house of the Russian chamber, is proposing changes to Russian law that would pave the way for a crypto exchange.
That said, a member of the Duma’s Economic Committee said that the Russian government is missing out on billions of rubles by not regulating the industry.
With that in mind, it seems highly likely that the Russian government will launch their own cryptocurrency exchange in order to collect more tax revenue. The idea of a government owning a crypto exchange might sound strange to westerners, but state owned enterprises are common in Russia.
They are especially common in the Russian banking industry with 64% of the total Russian banking sector controlled by state owned enterprises. So, this is not exactly something unusual for Russia despite it sounding strange to those not familiar with Russian business practices.
The Impact of Russian Owned Crypto Exchange on Cryptocurrency
Russia launching their own crypto exchange would be very interesting. The country is currently facing some very tough sanctions at the moment, so it would be interesting to see if US based cryptocurrency exchanges would ban the transfer of cryptocurrency from a Russian government owned exchange.
Other than that, the impact of the Russian government launching their own exchange would probably not be felt too much. It would obviously give more people access to cryptocurrency (Russians are banned from major crypto exchanges), but it’s not going to cause the price to drastically increase from where it currently stands at $16.5k (according to worldcoinstats data)
Will Other Governments Launch Their Own Crypto Exchanges?
We find it highly unlikely that any other government will launch their own crypto exchange. State owned enterprises are not particularly common in the western world. And smaller countries likely do not have the resources to launch their own crypto exchange.
China is the only country where it would make sense for the government to launch a crypto exchange, but the Chinese government is so against crypto that we find it highly unlikely that they will launch an exchange. They have basically banned crypto at this point.
Governments Will More Strictly Regulate Crypto Exchanges
While we find it unlikely that we will see any state owned crypto exchanges outside of Russia, we find it highly likely that crypto exchanges will see far more regulations in the future. The US Senate has already planned a hearing about FTX on December 1, 2022. It’s almost a certainty that potential regulations for crypto exchanges will be discussed at the hearing.
Regulation is not a word that many in the crypto community want to hear. However, trust in centralized exchanges is at an all-time low at the moment and regulation may help to restore some trust in them.
It’s also important to note that regulating a centralized exchange is much different than regulating cryptocurrency. Forcing centralized exchanges to provide proof of reserves is really not that bad in our opinion. But it obviously does not guarantee anything. There have been plenty of scams emerging from Wall Street despite regulation.
That covers it for everything you need to know about Russia launching their own crypto exchange – the Russian government owns so many businesses that this really is not surprising. It’s doubtful that other governments will follow suit, but we may see other countries increase regulations surrounding centralized crypto exchanges.