MOSCOW, Jan 20 (Reuters) – Russia’s central bank on Thursday proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, the well-being of citizens and the sovereignty of its monetary policy.
The move is the latest in a global crackdown on cryptocurrencies, as governments from Asia to the United States fear that privately operated and highly volatile digital currencies could undermine their control over financial and monetary systems.
Russia has been arguing against cryptocurrencies for years, arguing that they could be used for money laundering or terrorist financing. Finally, in 2020, it gave them legal status, but banned their use as a means of payment.
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In a report released on Thursday, the central bank said that speculative demand primarily determined the rapid growth of cryptocurrencies and that they bore the hallmarks of a financial pyramid, warning of potential market bubbles threatening financial stability and citizens.
The Bank has proposed to prevent financial institutions from conducting any cryptocurrency operations, and these mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies in fiat currencies.
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The proposed ban includes cryptoburses. The cryptocurrency exchange Binance told Reuters that it is committed to working with regulators and hopes that the publication of the report will provoke a dialogue with the central bank on protecting the interests of Russian cryptocurrency users.
Restrictions on cryptocurrency ownership are not expected, said Elizaveta Danilova, head of the central bank’s financial stability department.
Active cryptocurrency users, Russians, have annual transactions of about $ 5 billion, the bank said.
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SHADING CHINA?
The central bank said it would work with regulators in countries where crypto-exchanges are registered to gather information on Russian clients’ operations. It pointed to steps taken in other countries, such as China, to reduce cryptocurrency activity.
In September, China intensified its crackdown on cryptocurrencies by banning all crypto transactions and mining, hitting bitcoins and other major coins, and pushing for cryptocurrency and blockchain stocks.
“So far, there are no plans to ban cryptocurrencies similar to China’s experience,” Danil said. “The approach we have proposed will suffice.”
Joseph Edwards, chief financial officer at Solrise Group, downplayed the report and said no one outside Russia would lose sleep because of it.
“Moscow, like Beijing, is always rattling the saber over ‘cryptocurrency bans,’ but Russia has never been a pillar of any aspect of the industry as China has ever been,” he said.
CRYPTNESS
Russia is the world’s third-largest bitcoin player after the United States and Kazakhstan, although Kazakhstan may see an exodus of miners over fears of tightening regulation after riots earlier this month. Read more
Russia’s central bank said cryptocurrency mining has caused energy consumption problems. Bitcoin and other cryptocurrencies are “mined” by powerful computers that compete with others involved in the global network to solve complex mathematical puzzles. The process devours 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” – a crypto jargon for the amount of computing power used by computers connected to the bitcoin network.
Moscow’s BitRiver, which operates data centers in Siberia that host bitcoin miners, said it did not consider a total ban on cryptocurrencies likely, and expected a balanced approach once the various ministries discussed the proposals.
The central bank, which plans to issue its own digital ruble, said the expansion of crypto assets would limit monetary policy sovereignty, with higher interest rates needed to curb inflation.
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Reports by Elena Fabrichnajová and Alexander Marrow; Tom Wilson additional reports in London; Edited by Emelia Sithole-Matarise
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