Russia’s central bank advocated a total ban on the use and mining of all cryptocurrencies, citing threats to the country’s financial system and ecology.
Cryptocurrency has all the signs of a pyramid scheme and threatens monetary policy sovereignty, according to a paper released by the central bank on Thursday. It also targeted mining, claiming that it harms Russia’s green program, jeopardizes the country’s energy supply, and compounds the bad consequences of the rise of cryptocurrencies by creating incentives to avoid regulation.
“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia,” the central bank said.
Russia already prohibits the use of cryptocurrency for payments, and the central bank banned mutual funds from investing in it in December. Individuals and firms who break the regulations should be held accountable, according to the research, which estimates that Russian crypto trading volume is around $5 billion per year.
Elizaveta Danilova, the chief of the central bank’s financial stability department, said during an online conference Thursday that the proposals would not apply to Russian assets stored abroad, but that persons with offshore exchange accounts would be able to trade crypto.
While any prohibition would have to be enacted into law before taking effect, Speaker of the Lower House of Parliament Vyacheslav Volodin indicated this week that establishing a regulatory framework will be a top priority for the State Duma in the upcoming spring session.
Russia has a strong mining business, which has grown in importance since China declared crypto-related transactions to be illegal financial activity and promised to eradicate digital asset mining. Crypto mining consumes a lot of electricity and requires a lot of processing power.
According to Cambridge University data released in October, Russia overtook the United States and Kazakhstan as the world’s third-largest crypto miner last year.
The country’s major facilities are in the country’s north and Siberia, where temperatures are cold and power is inexpensive. BitRiver, Minespot, and BitCluster are some of the most well-known companies in the field.
“We hope that this proposal will be discussed with the industry,” co-founder of BitCluster Vitaliy Borschenko said. “The central bank’s main concern is that cryptocurrency won’t be traded in Russia and crypto mining poses no risks in this regard.”
The central bank’s stance on mining may attract opposition from politicians. Russia should regulate and tax mining, but given the country’s economic advantages, it should not be outlawed, according to Vladimir Gutenev, the head of the Duma’s industry committee and a member of the ruling United Russia party.
Meanwhile, Kazakhstan, which experienced an inflow of crypto mining following China’s prohibition, has been roiled by political upheaval and a lack of energy, making it an unlikely destination for Russian miners looking for a new home.
The announcement had minimal impact on the cryptocurrency market, with Bitcoin rising as much as 4.2 percent in tandem with a gain in IT stocks.
“Bitcoin mining is certainly growing faster than whatever it is losing in these announcements. A good way to say it is the currency is more mature at this point,” David Tawil, president of ProChain Capital, said by phone. “Today, we’ve progressed far beyond this.”
(Adapted from AlJazeera.com)