On Thursday, Russia’s central bank suggested banning crypto-related activities like issuance, trade, and mining, citing concerns to financial stability, residents’ well-being, and the country’s monetary policy sovereignty.
In a paper titled “Cryptocurrencies: Trends, Risks, and Measures,” Russia’s central bank advocates for a ban on a variety of crypto activities. The document was released on Thursday, and through March 1st, the regulator is accepting comments and ideas on its contents. The Central Bank of Russia (CBR) notes in the report the worldwide crypto market’s rapid expansion over the last year, as well as Russians’ annual $5 billion in crypto transactions.
The move is the latest in a string of international cryptocurrency crackdowns, as governments from Asia to the United States fear that privately controlled and highly volatile digital currencies would threaten their authority over banking and monetary systems.
Russia has been a vocal opponent of cryptocurrencies for years, arguing they can be misused to launder the money or sponsor terrorism. In 2020, they were granted legal status, but their use as a means of payment was prohibited.
The central bank stated in the report that speculative demand drove cryptocurrencies’ quick growth and that they resembled a financial pyramid, indicating the possibility of market bubbles endangering financial stability and citizens.
To combat these dangers and the potential of criminal conduct, the Bank of Russia plans to work with the Russian government and parliament on a number of suggested legal modifications in the coming months. The introduction of legal liability for violations of the prohibition on the use of crypto as a means of payment for goods and services is one of them.
The bank proposed prohibiting financial institutions from engaging in any cryptocurrency transactions and suggested that measures be devised to stop transactions involving the purchase or sale of cryptocurrencies for fiat currencies.
Cryptocurrencies like bitcoin and stablecoins have been referred to by the authorities as “monetary surrogates” that are illegal under Russian legislation. It now seeks to outlaw its issuance and distribution in Russia, including on digital asset exchanges and peer-to-peer networks.
The central bank stated that it would collaborate with regulators in countries where crypto exchanges are registered to collect data on Russian clients’ transactions. Other countries, such as China, have taken steps to curtail cryptocurrency activities, according to the report.
In September, China reinforced its control on cryptocurrencies by implementing a blanket ban on all cryptocurrency transactions and mining, driving down the price of bitcoin as well as other major coins and exerting pressure on crypto and blockchain-related equities.
At this time, there are no plans to ban cryptocurrencies in the same way that China has, said Elizaveta Danilova, head of the central bank’s financial stability section.
“The strategy we’ve presented will be sufficient.”
Russia is the world’s third-largest cryptocurrency mining nation, after only the Kazakhstan and United States, but the former may see a miner outflow as a result of concerns about harsher regulation following recent instability.
Crypto mining, according to the Bank of Russia, is causing concerns with energy use. Bitcoin and other cryptocurrencies are “mined” by powerful computers competing to solve complicated mathematical puzzles against others connected to a worldwide network. The process uses a lot of energy and is often powered by fossil fuels.
The bank said,
“The ideal option is to establish a ban on cryptocurrency mining in Russia”.