Russia proposes ban on use and mining of cryptocurrencies

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

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

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

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

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In a report published on Thursday, the central bank said that speculative demand is primarily driving the cryptocurrencies’ rapid growth and that they have exhibited characteristics of a financial pyramid, warning of potential bubbles in the market that threaten financial stability and citizens.

The bank proposed blocking financial institutions from conducting cryptocurrency operations and said mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies for fiat currencies.

The proposed ban includes crypto exchanges. Cryptocurrency exchange Binance told Reuters that it has pledged to work with regulators and hoped the report’s release would spark a dialogue with the central bank on protecting the interests of Russian crypto users.

There are no restrictions on holding cryptocurrencies, said Elizaveta Danilova, head of the central bank’s financial stability department.

Active users of cryptocurrencies, Russians, have an annual transaction volume of about $5 billion, the bank said.

CHINA SHADOW?

The central bank said it will work with regulators in countries where crypto exchanges are registered to gather information on Russian customers’ operations. It pointed to steps being taken in other countries, such as China, to rein in cryptocurrency activity.

In September, China ramped up 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 and blockchain-related stocks.

“Right now there are no plans to ban cryptocurrencies similar to China,” Danilova said. “The approach we propose will suffice.”

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

“Moscow, like Beijing, is always rattling the saber over ‘crypto bans,’ but Russia has never been a pillar in any facet of the industry like China has at times been,” he said.

CRYPTO MINING

Russia is the world’s third-biggest player in bitcoin mining after the United States and Kazakhstan, although the latter could see an exodus of miners amid fears of tightening regulation following the unrest earlier this month. Continue reading

The Bank of Russia said that crypto mining causes energy consumption problems. 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 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% of the world’s “hashrate” — crypto jargon for the amount of processing power consumed by computers connected to the Bitcoin network.

Moscow-based BitRiver, which operates data centers in Siberia hosting Bitcoin miners, said it doesn’t think a full crypto ban is likely and expects a balanced position to develop once various ministries discuss the proposals .

The central bank, which plans to issue its own digital ruble, said that the increasing proliferation of crypto assets would limit monetary policy sovereignty as higher interest rates are needed to curb inflation.

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

Our standards: The Thomson Reuters Trust Principles.

source https://www.bisayanews.com/2022/01/21/russia-proposes-ban-on-use-and-mining-of-cryptocurrencies/