Cryptocurrency primer

Previously, we had material regarding cryptocurrencies, but the world of finance is fleeting... Despite the very long period of limitation of this topic, it does not become less relevant to this day.
The world of cryptocurrencies has grown stronger and firmly established itself in the hit parade of news feeds, which in turn gives rise to many questions. On September 4, 2017, the press service of the Central Bank of the Russian Federation expressed its opinion on the use of private cryptocurrencies.
We will not provide a full quotation, but we will dwell on some points on which we would like to receive comments from financial experts, but expert Alexei Simakov will help us with this.

GP: “Most operations with cryptocurrencies are carried out outside the legal regulation both in the Russian Federation and in most other states.

Cryptocurrencies are not guaranteed or backed by the Bank of Russia.” Many states are of the same opinion. So, for those who are new to this market, please explain to what extent and how a cryptocurrency consumer can be legally insured. Or, taking into account “outside the legal regulation”, no one is in any way immune from fraud? Alexei: Good afternoon!
The question is quite extensive, but in short: no official and transparent legal methods for conducting a transaction using cryptocurrency in real life have been developed at the moment. The Russian Federation already has a working group that is developing a bill to regulate this market and transactions conducted with cryptocurrency. Unfortunately, this is a long process. But there are many ways to protect yourself when conducting transactions in cryptocurrency, and this can be discussed separately. We have extensive experience in the field of countering fraud with bank cards, and we have also been working with cryptocurrencies for a long time, and we can definitely say: if you were deceived in the field of cryptocurrencies, then this is primarily due to your ignorance of this area, or insufficient analytics of ongoing transactions. The main thing is to follow the basic security requirements: make wallets more reliable, use hardware wallets, use keys on secure devices, and always use an antivirus. On September 26, 2017, we conducted another real estate purchase transaction for the Ether cryptocurrency, and it was successful.
This is far from the first case. In my opinion, transactions that are already being carried out successfully are a confirmation of the security of cryptocurrencies when used correctly. And in general, the world practice is already extensive, for example, in Japan, cryptocurrencies are endowed with the status of means of payment.

HP: “Cryptocurrencies are issued by an unlimited number of anonymous entities.

Due to the anonymous nature of cryptocurrency issuance, citizens and legal entities may be involved in illegal activities, including the legalization (laundering) of proceeds from crime and the financing of terrorism.” This statement is particularly interesting and requires clarification. Thus, the Central Bank states the fact that ordinary users of crypto-currencies, who, for example, invest their money in this area, can at any moment be easily accused of laundering or financial terrorism in general? Or is it some kind of trick of the international banking industry? Alexey: This question is quite interesting and complex at the same time.
We return to the question of what our cryptocurrency is. Given that it is not regulated by law, it follows that it is essentially nothing. Accordingly, it is not possible to legally accuse you of money laundering or terrorist financing. If you are an ordinary user and simply finance the funds that you honestly earned - what kind of complaints can there be in general? You can only be blamed and held liable if in real life you received money illegally and decided to whitewash them through cryptocurrencies. But this has nothing to do with cryptocurrency, you received these funds illegally in real life and should be punished precisely for this act, and not for using cryptocurrency. Since cryptocurrency is just a technology. For example, not so long ago, there was information in the media that several people would be judged for the sale of bitcoins.

But in fact it was not the correct presentation of information in order to draw more attention to the article. They will be tried for illegal banking and money laundering, not for selling bitcoins. Under each loud heading there is a real act, for which they are responsible. GP: I would like to dwell now on the risks, which also sound ominous for the Central Bank.

For your part, tell us about them, and what you should first of all pay attention to. “Transactions with crypto-currencies carry high risks both when conducting exchange transactions, including due to sharp fluctuations in the exchange rate, and in the case of raising funds through ICO (Initial Coin Offering - a form of attracting investments from citizens in the form of issuing and selling investors new cryptocurrencies/tokens). There are also technological risks in the issuance and circulation of cryptocurrencies and the risks of fixing rights to "virtual currencies". This can lead to financial losses for citizens and to the impossibility of protecting the rights of consumers of financial services in case of their violation.” Alexey: This is a standard recommendation of any Central Bank of any country.
And this is a logical recommendation, since they cannot advocate for something that is essentially not regulated. There are risks, since ICOs can be carried out by both decent teams with good experience and reputation, as well as scammers trying to raise more money and the abyss. You need to understand that if you invest in a fraudulent ICO, then you will never get your money back in your life. Since in the real world you can block accounts, initiate criminal cases, etc., which is impossible to do in the virtual world. By the way, the Central Bank of China banned ICOs, but exactly until the moment they are regulated, and they are developing a bill to regulate ICOs so that everything is legal. But at the same time, Chinese investors continue to invest money. That is, such recommendations and prohibitions do not affect the industry. There are also technical risks, but with the right approach, they are leveled. The problem is that the Central Bank recommends not to participate in the ICO, but at the same time they do not provide reasonable ways to register the ICO.
In general, a good solution to this issue would be to register an ICO with the Central Bank (or another regulatory body). So ordinary citizens could understand that this project is on the lists and checked by the regulator, and, therefore, there is much less risk of losing the invested funds or they are completely absent. There are many methods for assessing the risks of an ICO, and for each specific case, there are methods for how to secure a transaction at the level of the virtual world.

SE: “Given the high risks of circulation and use of cryptocurrencies, the Bank of Russia considers it premature to admit cryptocurrencies, as well as any financial instruments nominated or related to cryptocurrencies, to circulation and use on organized trading and in the settlement and clearing infrastructure in the Russian Federation to service transactions with cryptocurrencies and derivative financial instruments on them.

In this regard, the Bank of Russia draws the attention of citizens and all financial market participants to the increased risks when using and investing in cryptocurrencies.” Interestingly, on the same day, along with a message from the press service of the Bank of Russia, the Central Bank of China announced that all operations with the initial placement of cryptocurrency tokens are considered illegal. All current ICOs in the country must be stopped immediately, the relevant online platforms are closed. And organizations and individuals who have already raised money for the placement of cryptocurrency tokens immediately returned the funds to investors, although they did not specify the mechanism for such a return. In your opinion, how connected and oriented to each other are these messages of the two main banks of the countries of Russia and China, what is behind this, and what are the further prospects for such a blocking of development? Alexey: I spoke about the statement of the Central Bank of China earlier, and explained why it was done.
In general, there were many such statements. For example, we can recall the end of 2015 - the beginning of 2016, when the Ministry of Finance promised to introduce criminal penalties for mining. More than a year and a half passed and nothing happened. I think there are two options. The first is that within a year a good decision will be made by the Russian Federation to regulate the market. If this does not appear in our country, then it will be implemented in other countries. You can pay attention to Kazakhstan, where a very interesting draft law is being prepared, which will take into account the interests of miners and blockchain technology in general, and after adoption this will be a very good precedent. Thus, either the state legalizes the sphere and will exercise some control, while becoming one of the world leaders and attracting investments, or the second option. The second option is negative - the FR prohibits technology and once again the country lags behind in technological development, because. it will be implemented somewhere else anyway. But the decision of the Russian authorities will not affect the market as a whole anyway (as I said earlier about China). It is impossible to block the blockchain and cryptocurrencies, because the main idea is precisely decentralization.

GP: Tell us, what are the popular and secret ways to make money on cryptocurrencies?

Alexey: All methods of earning have long been known. These are good ICOs, mining, currency trading on stock exchanges, trust management, equipment trading, training and consulting. A lot can be said about each of the activities. It’s a little more complicated with secret methods… For example, there are special trading strategies for the exchange, there are individual ways to speed up the work of mining equipment, etc., but they don’t like to spread such information.

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