Russia: Central Bank proposes ban on use and extraction of cryptocurrencies

LAST UPDATE: 16:28

Russia’s central bank on Thursday proposed a ban on the use and mining of cryptocurrencies in Russia, citing threats to financial stability, public welfare and the dominance of its monetary policy.

“The status of the Russian ruble, which is not a reserve currency, does not allow for a lenient approach to Russia and ignoring the accumulation of risks. and in particular “to establish a ban on the organization of mining or mining and the circulation of cryptocurrencies… in the Russian Federation and to establish liability for breach of this prohibition”.

It is also proposed to establish legal liability for violating the legal prohibition on the use of cryptocurrencies as a means of payment for goods, works and services sold and purchased by legal and natural persons residing in the Russian Federation.

Russia has long opposed cryptocurrencies, saying they could be used to launder money or finance terrorism. Eventually in 2020 it gave them legal status, but banned their use as a means of payment.

In December, the price of bitcoin fell, after Reuters had quoted, citing sources, that the Russian regulatory authority was in favor of a total ban on cryptocurrencies.

The central bank said in a report released on Thursday that speculative demand was primarily responsible for the rapid growth of cryptocurrencies and that they bore the characteristics of a financial pyramid, warning that market bubbles could be created, threatening financial stability and citizens.

The bank in its report proposes to prevent financial institutions from conducting any transactions with cryptocurrencies and stresses that mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies against fiat or traditional currencies. The proposed ban also includes cryptocurrency exchanges.

The Russians are described in its report as active users of cryptocurrencies, with an annual trading volume of about $ 5 billion.

Russia is the world’s third-largest player in bitcoin mining, after the United States and Kazakhstan, although Kazakhstan may stop mining cryptocurrencies amid fears that regulations could be tightened after the unrest earlier this month.

The central bank says cryptocurrency mining is causing energy problems. Bitcoin and other cryptocurrencies are being mined by powerful computers competing with others connected to a global network to solve complex mathematical puzzles. This process consumes electricity and is often fueled by fossil fuels. The Central Bank also notes the negative impact of cryptocurrency mining on related markets and the environment.

“The best solution is to ban cryptocurrency mining in Russia,” the central bank said in a statement.

The role of the Federal Security Service

The Federal Security Service (FSB) has persuaded the head of the Central Bank of Russia, Elvira Nabiulina, to proceed with a complete ban on cryptocurrency transactions in Russia. This is reported, according to the Russian agency Interfax and the newspaper RBK, the Bloomberg agency, which cites two sources.

According to Bloomberg, the FSB made the proposal to ban cryptocurrencies, because the Russians are increasingly transferring money in cryptocurrencies to “unwanted organizations” and in the media registered in the register of “foreign agents”. Interfax reports that the Central Bank and the FSB did not comment to Bloomberg.

At the same time, he points out that the opposition has only an insignificant number of transactions with cryptocurrencies. The total volume of cryptocurrencies held by the Russians, according to Bloomberg estimates, amounts to 7 trillion rubles (in Russia are stored about 17 million cryptocurrencies).

The Kommersant newspaper reported yesterday that the Central Bank had begun to closely monitor Russian banks’ transactions in cryptocurrencies and that the Central Bank had sent a request to Russian banks in late 2021 regarding their cooperation in the field of cryptocurrencies between citizens, attributing this move “to the assessment of the risks arising from money laundering and terrorist financing”. At the same time, the newspaper estimated that the volume of the over-the-counter cryptocurrency market in Russia and the former Soviet republics reaches about $ 1.3 billion per month, of which 50% is in Russia.

In December, Elvira Nabiulina had spoken out against cryptocurrency trading in Russian financial institutions. Earlier in the day, Reuters reported that the central bank was planning to ban cryptocurrency investments in Russia.

With information from AMPE