Russia-Ukraine crisis: Cryptocurrencies plunge from impact, Bitcoin in red

Bitcoin | Representative image

Cryptocurrencies traded in the red early on February 22 amid the impact of the Russia-Ukraine crisis. Russia's continued aggression towards Ukraine has prompted the United States and Europe to vow sanctions, further casting shadow over global markets.

Bitcoin's price is currently Rs 29.63 lakh, by a 4.35 percent fall over the past 24 hours, as of 8.55 am. Ethereum at Rs 2.05 lakh is also down by 4.81 percent.

The biggest losers among cryptocurrencies are Cardano (Rs 67.97) and XRP (Rs 55.72), which tanked 11.31 percent and 11.16 percent respectively; followed by Binance Coin (Rs 28,500, down 7.65 percent); Dogecoin (Rs 10.21, down 7.43 percent); and Polkadot (Rs 1,286, down 6.91 percent). The sole green was Tether priced Rs 79.45, with a minor 0.49 percent gain.

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Geo-politics at play

Russian President Vladimir Putin ordered the deployment of troops to two breakaway regions in eastern Ukraine after recognising them as independent on February 21, accelerating a crisis the West fears could unleash a major war.

The moves drew condemnation from the United States and the European Union, who vowed of new sanctions, although it was not immediately clear whether the Russian military action would be regarded by the West as the start of a full-scale invasion. The area was controlled by Russian-backed separatists and Moscow in practice.

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The United States on February 22 said it will impose sanctions on Moscow, following an initially cautious response to President Vladimir Putin's order for Russian troops to deploy in two Kremlin-backed separatist areas of Ukraine.

"We plan to announce new sanctions on Russia tomorrow in response to Moscow's decisions and actions today. We are coordinating with allies and partners on that announcement," a White House spokesperson told AFP.

This comes even while the Emergency UN Security Council meeting on the Ukraine crisis will start shortly. It will be chaired by Russia, which currently holds the presidency of the Council.

Policy confusion

Meanwhile, Russia’s confused crypto policy also added to the slump.

The country's finance ministry on February 21 said it would take proposals on cryptocurrencies from the country's central bank into account so long as they do not contradict its own approach, paving the way for legislation governing digital assets.

A simmering dispute over cryptocurrency regulation in Russia heated up on February 18 as the finance ministry submitted legislative proposals to the government that clashed with the central bank's demand for a blanket ban.

The Bank of Russia has proposed banning cryptocurrency trading and mining due to the threat digital currencies pose to financial stability. But the finance ministry prefers legislation that regulates cryptocurrencies, allowing them as an investment tool, but not as a means of payment.

The finance ministry's draft legislation aims to create a legal market for digital currencies.

One proposal is for transactions involving the purchase or sale of cryptocurrency requiring customer identification, a move that may diminish one of cryptocurrencies' major selling points – their anonymity.

Other proposals include foreign cryptocurrency exchanges having to obtain a licence in Russia, and introducing financial literacy tests that determine how much individuals are permitted to invest.

Citizens who successfully pass the tests would be permitted to invest up to 600,000 roubles ($7,853) in digital currencies each year, the finance ministry said. Those who fail would have an investment limit set at 50,000 roubles annually.

The central bank also opposes cryptocurrency mining, whereby powerful computers compete against others hooked up to a global network to solve complex mathematical puzzles.

The bank has warned of inefficient energy consumption and the environmental impact of mining, while the finance ministry prefers to permit mining under a taxation basis.