Russia’s central bank suggested that all cryptocurrency creation and use within the largest crypto-mining countries in the world be banned. This was due to the risks it poses for the country’s financial system as well as the environment.
The central bank reported Thursday that crypto bears the signs of a pyramid scheme, and it undermines the sovereignty over monetary policy. The central bank also criticized mining as it impedes Russia’s green agenda and jeopardizes Russia’s energy supply. It is also said that the spreading of cryptocurrency encourages people to ignore regulations.
The central bank stated that cryptocurrencies pose greater financial stability risks for emerging markets, such as Russia.
Russia bans crypto-based payments. In December, the central bank prohibited mutual funds from investing in it. Thursday’s report demanded that individuals and businesses who violate the rules be held accountable. It cited estimates that Russian crypto trading turnover is about $5 billion per year.
The proposals will not apply to assets abroad held by Russians, Elizaveta Dailova, head of the central bank’s financial stabilization department, stated at an online briefing on Thursday. She also said that anyone with an offshore account can trade crypto. Vyacheslav Volodin, the speaker of the lower chamber of parliament, stated this week that any ban must be passed into law before it can be implemented. However, he said that the creation of a regulatory framework would be a top priority during the spring session of the State Duma.
Russia has a vibrant mining sector. This industry has grown in importance after China declared crypto-related transactions illegal financial activity. They also vow to eradicate the mining of digital assets. Crypto mining requires a lot of computing power and is very energy-intensive.
Russia became the world’s third-biggest crypto miner last year, after the U.S. and Kazakhstan,
Vitaliy Borschenko, the co-founder of BitCluster, said via phone that he hoped the proposal would be discussed with the industry. “The main concern of the central bank is that cryptocurrency will not be traded in Russia, and crypto mining poses no risk in this regard.”
Legislators could be resistant to the central bank’s mining policy. Russia should tax and regulate mining but shouldn’t ban it due to its competitive advantages, Vladimir Gutenev of the Duma’s industrial committee, said Interfax news agency. Gutenev is also a member of the ruling United Russia party. While the Chinese ban on crypto mining was lifted in China, Kazakhstan, a neighbour, is currently experiencing political turmoil and an energy shortage, making it an unlikely place for Russian miners looking to find a new home.
The crypto market was not reacting to the news. Bitcoin rose as high as 4.2% in line with an increase in tech shares.
“Bitcoin mining has been growing at a faster rate than what it lost in these announcements,” Tawil said. David Tawil, president and CEO of ProChain Capital said via phone that the currency is maturing faster than it was losing in these announcements. “Today we have advanced far beyond that.”
According to two sources familiar with the matter, the central bank’s harsh stance against crypto is in line with Russia’s powerful security service, which also supports a ban on competition domestically to stop it from being used to finance the country’s opposition. They claimed that Russia has 17 million crypto wallets holding more than 7 trillion rubles ($92billion) worth of assets.
According to people who requested anonymity because the information isn’t public, the Federal Security Service (or FSB) lobbied Governor Elvira Nabullina for a blanket ban. Russians are using difficult-to-trace payments to give money to unwelcome organizations.
They said that while only a small fraction of Russian crypto users are funded by opposition and media, the security services are concerned that this is a growing problem.
A spokesperson from the FSB did not respond to requests for comment.
Danilova of Russia’s central bank stated Thursday that the FSB has long maintained that the Bank of Russia considers the risks of cryptocurrencies high. “This is our position. “But at the same, we are happy if other organs agree with us.”
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