Kyrgyzstan’s Central Bank Warns Citizens on Dangers of Cryptocurrencies

• The monetary authority also warned about the dangers of decentralized digital currencies. 
• The properties of cryptocurrencies make them a risky option for settlements.

Kyrgyzstan’s central bank has warned residents about the dangers of digital assets as their use grows in popularity. The Kyrgyz Republic’s central bank’s monetary authority has also said that the use of cryptocurrency for payment purposes is prohibited.

Kyrgyzstan’s central bank has observed that virtual assets like cryptocurrencies are becoming more popular in the country. According to the regulator, using them to purchase or sell goods and services is still illegal, with the Kyrgyz Som being the country’s sole legal money. According to local media reports, the monetary authority also warned about the dangers of decentralized digital currencies. 

Lack of a Controlling Central Body

The National Bank of Kyrgyzstan (NBK) highlighted that this increases the likelihood of exchange rate volatility and value loss. The lack of a “controlling central body” and the properties of cryptocurrencies make it a risky option for settlements. 

Further, the NBK stated:

“Therefore, we recommend citizens to be prudent and refrain from using cryptocurrency for payments and settlements. Users assume all possible risks and negative consequences when making settlements using cryptocurrency and virtual assets.”

Central banks in neighboring countries have shown interest in the crypto industry but have also cautioned that it is too early to discuss the legalization of cryptocurrencies like bitcoin. China’s crackdown on the mining sector in May 2021 lured many crypto enterprises to Central Asia last year, notably miners. Since then, there have been efforts to curb mining in both countries, including shutting down illicit crypto farms and boosting the power costs for approved mining firms. Electricity shortages and damage to electrical networks have been attributed to underground mining.