Russian c.bank proposes to ban cryptocurrencies and crypto mining


crypto currency
Representations of virtual cryptocurrencies are seen in this illustration, taken on November 28, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

Russia’s central bank proposed Thursday to ban the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, the well-being of citizens and their monetary political sovereignty.

The move is the latest in a global crackdown on cryptocurrencies, as governments from Asia to the United States fear that highly volatile, privately operated digital currencies could undermine their control of financial and monetary systems.

Russia has argued for years against cryptocurrencies, saying they could be used for money laundering or to finance terrorism. It finally gave them legal status in 2020, but banned their use as a means of payment.

In December, the price of bitcoin fell after Reuters reported, citing sources, that Russia’s regulator was in favor of an outright ban on cryptocurrencies. read more

In a report published on Thursday, the central bank said that speculative demand mainly determined the rapid growth of cryptocurrencies and that they had characteristics of a financial pyramid, warning that bubbles could form in the market, threatening financial stability and citizens.

The bank proposed to prevent financial institutions from carrying out any operations with cryptocurrencies and mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies in exchange for fiat or traditional currencies. The proposed ban includes crypto exchanges.

Russians are active users of cryptocurrencies, the central bank said, with an annual transaction volume of around $5 billion.

CRYPTOMINING

Russia is the world’s third-largest player in bitcoin mining, behind the United States and Kazakhstan, though the latter may see an exodus of miners over fears of tighter regulation following unrest earlier this month. read more

The central bank said that crypto mining created problems for energy consumption. Bitcoin and other cryptocurrencies are “mined” by powerful computers that compete against others connected to a global network to solve complex mathematical puzzles. The process consumes a lot of electricity and often runs on fossil fuels.

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

In August, Russia accounted for 11.2% of the global “hashrate” — crypto jargon for the amount of computing power used by computers connected to the bitcoin network.




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