Upping its hostile regulatory ante against cryptocurrency trading and mining in Russia, the country's central bank today called for a blanket ban on cryptocurrencies, citing them as "volatile and widely used in illegal activities", and a threat to the country's financial stability, citizens’ wellbeing and the sovereignty of its monetary policy.
The report titled "Cryptocurrencies: trends, risks, measures" observed that cryptocurrencies "offer an outlet for people to take their money out of the national economy, thereby undermining it and making the regulators job of maintaining optimal monetary policies harder."
This comes weeks after the Central Bank of Russia announced its plans to collect information from commercial banks with regards to certain private money transfers, including details of clients who traded in cryptocurrency both in the country and abroad.
While the country had given legal status to cryptos in 2020, Russia has already outlawed accepting cryptocurrency as a means of payment in exchange for goods or services. However, the latest report focused on additional penalties for those flouting this norm.
Reportedly, the bank is also in the works to introduce its own digital currency (CBDC) or the digital ruble, which it believes is the future of banking in the country, satiating the citizens' need for quick, efficient and cheap payment options.
The country also aims to purge its financial infrastructure of cryptocurrency. The report recommended that in addition to the continuing ban on Russian mutual funds when it comes to investing in cryptocurrency, the country's institutional investors should also not invest in crypto, and neither should the country's financial organizations hold crypto as a part of their assets. Suitable punishments for those breaking this have also been proposed.
The long list of bans does not end here. While the report already stated the need to forbid any crypto-circulation in the country by banning online cryptocurrency exchanges, over-the-counter trading desks and peer-to-peer platforms, a major question it raised was on clipping its issuance.
The best solution is to introduce a ban on cryptocurrency mining in Russia
Trailing only the USA (35.40 percent) and Kazakstan (18.10 percent) as of August 2021 when it comes to average monthly hashrate, which is an indicator of the volume of cryptocurrency mining undertaken in the region, Russia (11.23 percent) is a major mining hub, as per the Cambridge Bitcoin Electricity Mining Index.
And in the light of the ongoing Kazakh shutting down electricity provisions for crypto mining, the news could potentially shuffle some feathers. But most miners are not surprised, mentioning that the possibility of an "outright" ban is negligible and that the bank is simply reaffirming its previous stance.While the report calls an outright ban to be the "best" and "optimal" solution for Russia, it also highlighted that mining "creates a non-productive electricity expenditure, which undermines the energy supply of residential buildings, social infrastructure and industrial objects, as well as the environmental agenda of the Russian Federation."