Russia proposes to ban the use and mining of cryptocurrencies

  • Russian c.bank proposes to ban the use of cryptocurrency
  • Regulator warns of financial stability risks
  • Analysts say the wider impact is negligible for now
  • Ban on cryptocurrency exchanges also proposed

MOSCOW, Jan 20 (Reuters) – Russia’s central bank proposed on Thursday to ban the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, the wellbeing of citizens and its monetary policy sovereignty.

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

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

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In a report on Thursday, the central bank said speculative demand mainly drives the rapid growth of cryptocurrencies and exhibits the characteristics of a financial pyramid, warning of potential bubbles in the market, threatening the financial stability and citizens.

The bank proposed to prevent financial institutions from carrying out transactions with cryptocurrencies and said mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies against fiat currencies.

The proposed ban includes crypto exchanges. Cryptocurrency exchange Binance told Reuters it was committed to working with regulators and hoped the release of the report would spark a dialogue with the central bank about protecting the interests of Russian crypto users.

Restrictions on cryptocurrency ownership are not being considered, said Elizaveta Danilova, head of the central bank’s financial stability department.

Active cryptocurrency users, Russians have an annual trading volume of around $5 billion, the bank said.

SHADE CHINA?

The central bank said it would work with regulators in countries where crypto exchanges are registered to collect information on Russian client transactions. He pointed to steps taken in other countries, such as China, to curb cryptocurrency activity.

In September, China escalated its crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and putting pressure on crypto-related and crypto-related stocks. the blockchain.

“For now, there are no plans to ban cryptocurrencies similar to China’s experience,” Danilova said. “The approach we have proposed will suffice.”

Joseph Edwards, chief financial strategist at crypto firm Solrise Group, downplayed the significance of the report, saying no one outside of Russia would lose sleep over it.

“Moscow, like Beijing, always waves its saber on ‘crypto bans,’ but Russia has never been a mainstay in any facet of the industry the way China has sometimes been,” did he declare.

CRYPTOMINING

Russia is the world’s third-largest bitcoin mining player, behind the United States and Kazakhstan, although the latter may see an exodus of miners amid fears of tighter regulations following the early turmoil. month. Read more

The Bank of Russia said crypto mining creates power consumption issues. Bitcoin and other cryptocurrencies are “mined” by powerful computers that compete with others 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 introduce a ban on cryptocurrency mining in Russia,” the bank said.

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

Moscow-based BitRiver, which operates data centers in Siberia hosting bitcoin miners, said it was not considering a full crypto ban, expecting a balanced position to develop once that different departments will have discussed the proposals.

The central bank, which plans to issue its own digital rouble, said the widespread use of crypto assets would limit monetary policy sovereignty, with higher interest rates needed to contain inflation.

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Reporting by Elena Fabrichnaya and Alexander Marrow; additional reporting by Tom Wilson in London; Editing by Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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