The move is the latest in a global cryptocurrency crackdown as governments from Asia to the United States worry that privately operated and highly volatile digital currencies could undermine their control of financial and monetary systems.
Russia’s central bank on Thursday (20 January) proposed banning the
use and mining of cryptocurrencies on Russian territory, citing threats
to financial stability, citizens’ wellbeing and its monetary policy
sovereignty.
Russia has argued for years against
cryptocurrencies, saying they could be used in money laundering or to
finance terrorism. It eventually gave them legal status in 2020 but
banned their use as a means of payment.
In a report published on Thursday, the
central bank said speculative demand primarily determined
cryptocurrencies’ rapid growth and that they carried characteristics of a
financial pyramid, warning of potential bubbles in the market,
threatening financial stability and citizens.
The bank proposed preventing financial
institutions from carrying out any operations with cryptocurrencies and
said mechanisms should be developed to block transactions aimed at
buying or selling cryptocurrencies for fiat currencies.
The proposed ban includes crypto exchanges.
Cryptocurrency exchange Binance told Reuters it was committed to
working with regulators and hoped the report’s release would spawn
dialogue with the central bank on protecting the interests of Russian
crypto users.
Restrictions on owning cryptocurrency are
not envisaged, said Elizaveta Danilova, head of the central bank’s
financial stability department.
Active cryptocurrency users, Russians have an annual transaction volume of about $5 billion, the bank said.
Shadowing China?
The central bank said it would work with
regulators in countries where crypto exchanges are registered to collect
information about the operations of Russian clients. It pointed to
steps taken in other countries, such as China, to curb cryptocurrency
activity.
In September, China intensified its
crackdown on cryptocurrencies with a blanket ban on all crypto
transactions and mining, hitting bitcoin and other major coins and
pressuring crypto and blockchain-related stocks.
“For now there are no plans to ban
cryptocurrencies similar to the experience of China,” Danilova said.
“The approach we have proposed will suffice.”
Joseph Edwards, head of financial strategy
at crypto firm Solrise Group, played down the report’s significance,
saying no one outside Russia would be losing sleep over it.
“Moscow, like Beijing, is always rattling
its sabre over ‘crypto bans’, but Russia has never been a pillar of any
facet of the industry in the same way as China has been at times,” he
said.
Crypto mining
Russia is the world’s third-largest player
in bitcoin mining, behind the United States and Kazakhstan, though the
latter may see a miner exodus over fears of tightening regulation
following unrest earlier this month.
The Bank of Russia said crypto mining
created problems for energy consumption. Bitcoin and other
cryptocurrencies are “mined” by powerful computers that compete against
others hooked up to a global network to solve complex mathematical
puzzles. The process guzzles electricity and is often powered by fossil
fuels.
“The best solution is to introduce a ban on cryptocurrency mining in Russia,” the bank said.
In August, Russia accounted for 11.2% of
the global “hashrate” – crypto jargon for the amount of computing power
being used by computers connected to the bitcoin network.
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