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On Thursday, Russia’s central bank called for a complete ban on cryptocurrency use and mining within its territory, citing environmental concerns and threats to financial stability and the sovereignty of its monetary policy.
The Bank of Russia Wants Cryptocurrency Outlawed
Cryptocurrency mining and usage may soon be banned in Russia.
In a Thursday report, Russia’s central bank said that cryptocurrencies are volatile, bear the hallmarks of pyramid schemes, and are widely used for illegal purposes. The 37 paged report also argued that cryptocurrency mining hurts Russia’s environmental agenda, jeopardizes the country’s energy supply, and makes maintaining optimal monetary policy harder.
Therefore, the Bank of Russia suggested that the country needed new laws and regulations that would effectively outlaw any crypto-related activities domestically. Specifically, the bank proposed a ban on all crypto transactions, including measures against domestic crypto exchanges, over-the-counter trading desks, and peer-to-peer platforms. It said:
“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia. This is due to the traditionally higher propensity for saving in foreign currency and an insufficient level of financial literacy.”
According to the bank, financial institutions should also not be allowed to invest in cryptocurrencies, and residents should not use the country’s financial infrastructure to facilitate crypto transactions. Last December, the bank issued a directive banning mutual funds from investing directly in cryptocurrencies. Now, it is proposing penalties for breaking this ban.
Cryptocurrencies are very popular in Russia. According to the report, the domestic annual crypto transaction volume is about $5 billion. Moreover, according to Cambridge University data, Russia is currently the home of the third-largest Bitcoin mining industry in the world, trailing only behind the U.S. and Kazakhstan.
Russia and Kazakhstan saw an influx of mining activity after China, the then-largest crypto miner, banned the industry and triggered an exodus of miners. Currently, most of Russia’s crypto mining industry is located in Siberia, where the temperatures are low and electricity cheap. Commenting on crypto mining in the report, the Bank of Russia said:
“Increased electricity consumption in the process of cryptocurrency mining contributes to an increase in the carbon footprint, which is clearly contrary to the goals of the global sustainable development agenda.”
In light of rising civil unrest and worsening energy crisis, Kazakhstan may see a miner exodus similar to the earlier one in China. If that happens and Russia decides to ban crypto mining, then the U.S. would remain the most viable safe haven for the industry.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.