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Centralization’s drawbacks include the fact that the Moscow Stock Exchange is still closed due to the ongoing Russian-Ukrainian conflict

The closure of the exchange, along with a falling ruble, could have a terrible impact on regular Russian citizens’ livelihoods.

The Central Bank of Russia once again banned trading on the country’s largest Moscow Stock Market (MOEX) on Wednesday, according to local news outlet, and will not open the exchange on Thursday. Since February 25, when Russia began its continuing armed takeover of Ukraine, trading on the MOEX has been halted. As a result of Western governments imposing punishing sanctions on Russia in reaction to the conflict, the exchange’s index has lost approximately 34% of its value on a monthly basis (not adjusted for inflation).

MOEX’s main website has also been down since Monday, with Ukraine’s IT Army claiming responsibility for the “hack.” Meanwhile, the Saint Petersburg Stock Exchange (SPB) in Russia is still closed, but will reopen tomorrow for restricted trade. Meanwhile, the Dow Jones Russia GDR Index, which measures the value of Russian firms traded on the London Stock Exchange, has lost 93% of its value in the last five trading days, predicting massive losses when Russian markets open.

Cryptocurrency exchanges, whether centralized or decentralized (CEXs or DEXs), should theoretically be free of such intervention. CEX servers might be spread out globally or do not disclose their server locations, in addition to their sheer numbers. Governments can therefore prohibit exchanges from operating within their borders, but they cannot prohibit crypto trading. When it comes to DEXs, their peer-to-peer nature allows anyone with an internet connection to join their wallets and trade crypto, making any form of prohibition difficult to implement.

While Russian financial institutions are well-equipped to withstand a stock market meltdown, ordinary Russians are not so fortunate. On the MOEX alone, more than 17 million retail investors trade, accounting for more than 40% of the country’s equities trading activity. When combined with a steep drop in the ruble’s value, ordinary investors in Russia, such as pensioners and retirees, are likely to see significant losses in their investments when markets open.

However, there may be no better way to comprehend the hazards of centralized control over capital markets than by looking through the archives of the SPB. The SPB was one of the best-performing stock markets in the world during the imperial period, even outperforming the New York Stock Exchange for much of the later half of the nineteenth century. With the onset of World War I, however, trade on the SPB came to a halt. They were only open for a short time after the Russian Revolution began in 1917. When the Bolsheviks took power, the SPB was shut down permanently, and investors who didn’t sell in time lost every kopek (Russian penny).


SNB & CHF | Russian equity index from the 1900s (Author’s note: The “spike” in 1917 was caused by hyperinflation during the Russian Revolution, when stock values “went up” merely because large-denomination ruble notes were printed, in part to support military expenditures.) In the meantime, their “actual” value in terms of foreign currencies plummeted.)

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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