Russia’s central bank has proposed a ban on all cryptocurrency operations in the country, one of the world’s largest centers for digital token mining.
According to the draft proposal, Russia would ban all issuance and operations of cryptocurrencies, stop banks from investing in cryptocurrencies, block the exchange of cryptocurrencies for traditional currency and introduce legal liability for the use of cryptocurrencies in purchases.
In a 36-page report released Thursday, the central bank said: “The skyrocketing growth and market value of cryptocurrencies are defined primarily by speculative demand for future growth, which creates bubbles.”
“Cryptocurrencies also have aspects of financial pyramids, as their price growth is largely supported by the demand of new market participants,” it adds.
The proposal comes after the EU’s senior financial regulator told the Financial Times it was a bloc should be banned the mining method used to produce most new bitcoins, an energy-intensive practice called “proof of work”.
Elizaveta Danilova, head of the central bank’s financial stability department, said Russians would still be allowed to own cryptocurrencies abroad, but warned that regulators would monitor their investments.
“We believe that it is very important to ban the use of Russia’s financial infrastructure to obtain cryptocurrency. We think that this will help remove a significant part of the risk and ensure that cryptocurrency will not be so popular, “she said, Interfax reports.
The announcement did not seem to undo the price of bitcoin, which rose 1.8 percent against the dollar on Thursday. After China declared all cryptocurrency activities illegal last September, the currency fell but recovered a few days later.
Elvira Nabiullina, the governor of Russia’s central bank, has long been a skeptic of cryptocurrencies.
“There are great risks of cryptocurrencies being used for money laundering and illegal operations, and we have put a lot of effort into clearing the financial system of illegal and suspicious transactions,” she said in an interview with FT last year. “A significant number of bank licenses we revoked were because they did suspicious things like this.”
“We’ve already beaten this problem and we don’t want to let him in the back door.”
In a report, Russia’s central bank said cryptocurrencies would boost already hot inflation by “limiting monetary policy sovereignty” and warned it could be used “to service illegal activities”.
The Russians earned about $ 5 billion in cryptocurrency transactions last year, according to the central bank.
Russia has also developed a thriving mining industry after China banned the practice last year. Cheap electricity prices and low temperatures in eastern Siberia have been a boon for mining companies, which rely on huge data centers filled with fast computers. Russia’s share of bitcoin mining rose to 11 percent last year from 6.8 percent in 2020.
Russia is the third largest country for cryptocurrency mining, according to the Cambridge Center for Alternative Financing, after the United States and Kazakhstan. Huobi, one of the largest trading venues by volume, said in September that Russian customers make up 10 percent of the company’s cash trading.
But Russia’s central bank has said the mining could potentially harm Moscow’s attempts to decarbonise its economy rich in natural resources and pose a risk to the country’s energy supply.
In October last year, Russia’s energy ministry said it was considering imposing tariffs on cryptocurrency miners, following a sharp rise in energy consumption in regions such as Irkutsk in the months following China’s ban.
The Irkutsk governor warned the government of an “avalanche jump in energy consumption” due to the influx of miners, but later said that mining should be classified as “entrepreneurial activity”.
By January, mining activity was related to power outages in the media of digital media professionals.