A ban on cryptocurrency mining and use has been proposed by the central bank of Russia, citing concerns to the country’s financial stability, residents’ well-being, and its capacity to control the country’s currency.
The central bank, which plans to issue its own digital rouble, claims that the widespread adoption of crypto assets will constrain monetary policy sovereignty, requiring higher interest rates to keep inflation under control.
The move is the latest in a string of international cryptocurrency crackdowns, as governments from Asia to the United States fear that privately controlled and highly volatile digital currencies would threaten their authority over banking and monetary systems.
For years, Russia has advocated against cryptocurrencies, claiming that they may be used to launder money or fund terrorists. In 2020, they were granted legal status, but their use as a means of payment was prohibited.
The central bank warned in a paper released on Thursday that speculative demand was primarily responsible for cryptocurrencies’ quick growth and that they had features of a financial pyramid, warning of possible market bubbles that might jeopardize financial stability and citizens.
The bank proposed prohibiting financial institutions from engaging in any cryptocurrency transactions and suggested that measures be devised to stop transactions involving the purchase or sale of cryptocurrencies for fiat currencies.
Russians are active bitcoin users, with an annual transaction volume of roughly $5 billion, according to the bank.
The central bank stated that it would collaborate with regulators in countries where crypto exchanges are registered to collect data on Russian clients’ transactions. Other countries, such as China, have taken steps to curtail cryptocurrency activities, according to the report.
Crypto mining, according to the Bank of Russia, is causing concerns with energy use. Bitcoin and other cryptocurrencies are “mined” by powerful computers competing to solve complicated mathematical puzzles against others connected to a worldwide network. The process consumes a lot of electricity and is frequently run on fossil fuels.
Russia is the third-largest bitcoin mining country in the world, after the United States and Kazakhstan, but the latter may see a miner exodus due to concerns about stricter regulation in the aftermath of turmoil earlier this month.
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