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| Representations of virtual cryptocurrencies are seen in this illustration taken November 28, 2021. REUTERS/Dado Ruvic/Illustration/File Photo |
Russia’s central bank on Thursday proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens’ wellbeing and its monetary policy sovereignty.
The move is the latest in a global cryptocurrency crackdown as governments from Asia to the United States worry that privately operated highly volatile digital currencies could undermine their control of financial and monetary systems.
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 December, the price of bitcoin fell after Reuters reported, citing sources, that Russia’s regulator was in favour of a complete ban on cryptocurrencies.
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 that bubbles in the market could form, 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, or traditional currencies. The proposed ban includes crypto exchanges.
Russians are active cryptocurrency users, the central bank said, with an annual transaction volume of about $5 billion.
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. read more
The central bank 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.