Earlier this week, the Bank of Russia released its “Cryptocurrencies: Trends, Risks and Regulations” paper, which proposes a blanket ban on the use and mining of all cryptocurrencies in the country.
Cryptocurrencies will be banned in Russia under a blanket ban proposed by the central bank. As part of the proposed ban, cryptocurrency trading, mining, and usage are prohibited in Russia. Once in effect, the law will only permit cryptocurrency ownership in Russia and excludes other activities.
An overview of the proposal has been published in a new consultation paper, which outlines the risks posed by the volatile nature of cryptocurrencies to financial stability and the wellbeing of Russian citizens. Cryptocurrencies are also widely used in illegal activities, as the paper explains.
In a recent report by the Russian central bank, it is noted that cryptocurrencies’ rapid growth is largely due to speculative demand. In short, it is leading to a potential market bubble with characteristics of a financial pyramid. If or when those investments lose their value, it could have a large impact on the country’s investors.
In 2020, Russia legalized cryptocurrencies, though it has since prohibited their use for transactions. As a result of the new proposal by the Bank of Russia, even more restrictions will likely be put in place around crypto in the country. This will have a significant impact on crypto exchanges in Russia as well.
The paper also emphasizes the issue of cryptocurrency mining. Mining cryptocurrency requires powerful computers with high computational power, which burdens a region’s power grid. A lot of countries are grappling with this issue now, and Russia’s central bank is showing signs of taking a stance.
The Russian Federation is the world’s third-largest bitcoin mining region. Considering that the corresponding energy consumption is overwhelming the country’s energy sources, the Bank of Russia believes “the prohibition of cryptocurrency mining in Russia may be the best solution” to mitigate the problem.
The country hasn’t outright banned cryptocurrencies even after taking all these steps, unlike China.Russian officials say they do not envisage a ban on cryptocurrency ownership after considering the views of other countries in the consultation paper.