Russia’s central bank has proposed banning all crypto activities in the country, one of the world’s largest digital token mining hubs.
According to the draft proposals, Russia would ban all activities and issuance of cryptocurrencies, prevent banks from investing in cryptocurrencies, block exchanges of cryptocurrencies for traditional money, and introduce liability. for the use of cryptocurrencies in the purchase.
In a 36-page report published on Thursday, the central bank said: “The dizzying growth and market value of cryptocurrencies are determined primarily by speculative demand for growth. in the future, this creates bubbles.”
“Cryptocurrencies also have aspects of the financial pyramid, because their price growth has been largely supported by demand from new entrants to the market,” it added.
The proposal comes after a senior EU financial regulator told the Financial Times that the bloc should be banned mining method used to produce most new bitcoins, an energy intensive method known as “proof of work”.
Elizaveta Danilova, head of the central bank’s financial stability department, said that Russians will still be allowed to own cryptocurrencies abroad but warned that regulators will monitor their holdings. surname.
“We consider it very important to ban the use of Russian financial infrastructure for cryptocurrency. We think this will help eliminate a significant portion of the risk and ensure that cryptocurrencies don’t get too popular,” she said, according to Interfax.
The announcement did not seem to knock bitcoin’s price off, which was up 1.8% against the dollar on Thursday. After China declares all crypto activities illegal Last September, the coin plunged but recovered a few days later.
Elvira Nabiullina, the governor of Russia’s central bank, is a longtime crypto skeptic.
“There are great risks of cryptocurrencies being used for money laundering and illegal activities, and we have put a lot of effort into debunking the financial system of illegal and dubious activities. unexpected,” she said in an interview with the FT last year. “A significant number of banking licenses that we have revoked are due to them doing questionable things like this.”
“We beat this problem and we don’t want to let it go through the back door.”
In its report, the Russian central bank said that cryptocurrencies would increase already-heated inflation by “restricting the sovereignty of monetary policy” and warned that it could be used “to serve illegal activity”.
Russians made around $5 billion from cryptocurrency transactions last year, according to the central bank.
Russia has also developed a thriving mining industry after China last year banned the practice. Cheap electricity and frigid temperatures in eastern Siberia are boon for mining companies that rely on huge data centers filled with fast computers. Russia’s bitcoin mining market share grew to 11% last year from 6.8% in 2020.
Russia is the third largest cryptocurrency mining country, according to data from the Cambridge Center for Alternative Finance, after the US and Kazakhstan. Huobi, one of the largest exchanges by volume, said in September that Russian users account for 10% of the company’s cash transactions.
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But Russia’s central bank said mining could damage Moscow’s efforts to decarbonize its natural resource-intensive economy and pose a risk to the country’s energy supply.
In October last year, the Russian energy ministry said it was considering the imposition of tariffs on cryptocurrency miners, following a large increase in energy use in regions such as Irkutsk in recent years. months after China’s ban.
The governor of Irkutsk warned the cabinet of “an avalanche-like spike in energy consumption” from the influx of miners, but later said that mining should be classified as a “business.”
By January, mining activity was link to power outages on digital assets specialized media.