Russia’s central bank proposes to ban cryptocurrency transactions and mining

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The central bank of Russia proposed this Thursday (20) the ban on the use and mining of cryptocurrencies in national territory. The justification cites threats to financial stability, the well-being of citizens and the sovereignty of the country’s monetary policy.

The move is the latest in a global crackdown on cryptocurrencies, with governments fearing that these assets, which are highly volatile and privately operated, could undermine their control over financial and monetary systems.

In a report published on Thursday, the Russian central bank said that speculative demand mainly determines the rapid growth of cryptocurrencies, and that they carry characteristics of a financial pyramid. He also warned that bubbles could form in the market that threaten financial stability and citizens.

The central bank proposed to prevent financial institutions from carrying out any operations with cryptocurrencies. According to the authority, mechanisms must be developed to block transactions aimed at buying or selling cryptocurrencies for fiat or traditional currencies. The proposed ban includes cryptocurrency exchanges.

The municipality stated that cryptocurrency mining created problems in the consumption of energy. Bitcoin and other cryptocurrencies are “mined” by powerful computers that compete against other machines connected to a global network to solve complex mathematical puzzles.

The process consumes electricity and is often powered by fossil fuels. “The best solution is to ban cryptocurrency mining in Russia,” the bank said.

According to data from the University of Cambridge until August 2021, Russia is the third most crypto-mining country in the world, accounting for 13.6% of the total.

The country lags behind U.S, with 42.7%, and Kazakhstan, with 21.9%, but the country may have lost second place due to the achievements of the protests and violent repression in early 2022.

Russia’s move would not be new. In 2021, the China banned cryptocurrency mining and transactions, claiming that the asset had a strong speculative character and that mining had a very large environmental impact. At the time, the country was the largest cryptocurrency miner, but today it no longer participates in the activity.

India is another country that studies ban cryptocurrencies, but the current draft legislation is still unclear to investors as the ban would only target “private cryptocurrencies”.

At a global level, The Savior is the only country in the world that made a cryptocurrency, in this case bitcoin, a legal currency in 2021. With the measure, commercial establishments are now required to accept transactions for the asset.

With information from Reuters

Reference: CNN Brasil

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