The Russian central bank suggested a ban on the use and mining of cryptocurrencies. The report came out on Thursday, citing concerns about the overall financial stability, people’s safety, and monetary policy independence.
Worldwide scrutiny on cryptos is on its way, as governments from Asia to the US fear that privately run and highly volatile digital currencies might threaten their banking systems and the monetary mechanism as a whole.
Russia has long taken a stand against cryptocurrencies, insisting that they may be used to launder money or support terrorist groups and other anti-government movements. It was in 2020 when the country legalised them for the first time, but their usage as a means of payment remained prohibited.
The central bank stated that speculative demand was primarily responsible for cryptocurrencies’ quick rise and that they exhibited features of a financial pyramid. CBR also warned of possible market bubbles that might put people and the overall financial stability at risk.
The Russian authority proposed that institutions should be prohibited from carrying out financial operations with cryptocurrencies and also that mechanisms should be implemented to stop transactions in which cryptos are bought with fiat currencies.
As expected, the suggested measures include crypto exchanges, the latter of which hope that there will be dialogue on protecting the interests of crypto users in Russia. Currently, the annual transaction volume in the country is estimated to be around $5 billion, according to CBR.
The Central Bank said it would cooperate with other regulators to get information about Russian clients and their operations. The authority also suggested that it could follow specific steps of other countries in restraining crypto activity, such as China.
China, for example, prohibited all crypto transactions, mining and other related activities, but CBR is not expected to get to a full-scale ban. Executives of CBR stated that the Russian approach would suffice.
However, the ban on crypto mining is expected to influence the entire industry as Russia is currently the third-largest player, only behind the United States and Kazakhstan.
According to the CBR, crypto mining created problems for energy consumption, accelerating the usage of fossil fuels. “The best solution is to introduce a ban on cryptocurrency mining in Russia”, the bank said.
In particular, Russian mining accounted for 11.2% of the global hash rate in August, so an eventual ban on the activity in Russia will undoubtedly have global implications.
BitRiver, a Moscow-based miner operating data centres throughout Siberia, said a complete ban is not expected. They hope for a balanced position once the discussion between Russian government agencies begins.
Amidst worldwide discussions on crypto regulations and potential prohibition, Bitcoin and Ethereal are currently down by 9% and almost 12%, respectively. It’s believed that the tumble was triggered under the weight of potential stock selloff and FED Policy.