he Central Bank of Russia has released data showing that the number of Russian citizens actively trading cryptocurrency has decreased in recent months. According to a report by the bank, there has been a noticeable fall in the volume of Russian visitors to major international cryptocurrency exchange websites in the second and third quarters of 2023.
Trading Volume and Exchange Visits on the Decline
The Central Bank reported direct declines in both the volume of cryptocurrencies flowing through accounts owned by Russian holders on exchanges, as well as website traffic to exchanges from Russian IP addresses.
Data from the bank showed trading activity dropping off in the last two quarters of the year, correlated with a wider downturn in crypto market volumes and prices globally in that same period. Exchange visits from Russian users specifically decreased from 5.8% to 4.9% of total exchange visits between Q2 and Q3 2023.
Sanctions Forcing Shift to Peer-to-Peer Markets
International economic sanctions levied against Russia following its invasion of Ukraine have impacted the ability of Russian traders to access major centralized crypto exchanges. Exchanges like Binance and Coinbase have blocked access for users with Russian IP addresses and bank accounts due to sanctions compliance requirements.
As a result, the Central Bank report noted that peer-to-peer cryptocurrency trading has become the main channel for Russians to acquire digital assets, with a 53.9% year-over-year increase in average monthly P2P trading volumes. However, the bank warned these less regulated platforms could pose risks.
Decline Driven by Both Sanctions and Bear Market Forces
While sanctions have played a clear role in deterring the use of regulated exchanges, the Central Bank report also attributed part of the decline in Russian crypto trading simply to bear market conditions dampening global retail investor interest.
Citing the severe price slump that began in late 2022, the bank said the fall in volumes among Russian traders correlated with broader macroeconomic factors cooling demand. Still, the sanctions impact isolating Russian users from major exchanges appears to have accelerated the downturn, pushing activity deeper underground to less traceable peer-to-peer channels.
Bank Monitoring Growing P2P Crypto Risks
As cryptocurrency trading migrates more to decentralized, non-custodial and hard to track peer-to-peer models in Russia, the Central Bank warns it is becoming increasingly difficult to fully identify the scale and risks of domestic digital currency activity.
However, the report noted Russian financial institutions are improving at spotting crypto-related transactions on banking networks. The Central Bank will continue closely monitoring both trading volumes and the emergence of any "alternative" cryptocurrency exchanges specifically aimed at Russian users to assess ongoing financial stability and criminal risks.