The Bank of Russia has called for a ban on the mining and trading of cryptocurrencies.
In a report published on Thursday, Russia’s Central Bank said crypto resembles a pyramid scheme and undermines national financial policy.
It also criticized the environmental impact of Bitcoin, which relies on an energy-intensive decentralized Proof of Work consensus mechanism.
Russia accounts for roughly 10% of the world’s Bitcoin hash rate, meaning it contributes a large share of the computing power needed to verify transactions and create new blocks. It is the world’s third-largest crypto miner after the US and Kazakhstan,
Bitcoin took a major dive when China announced its own crypto ban, but the markets were largely unmoved by Russia’s calls for a ban.
“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia,” the bank wrote.
“This is due to the traditionally higher propensity for saving in foreign currency and an insufficient level of financial literacy.”
Russia has already banned the use of crypto to make payments.
In its report, the bank said individuals and businesses should be bought to justice and estimated that roughly $5 billion of crypto is traded in Russia every year.
However, the rules will not apply to Russians living abroad, who will still be able to mine and trade crypto without being sent to the gulag.
Elizaveta Danilova, the central bank’s financial stability department head, said: “We consider it very important to ban using Russian financial infrastructure to obtain cryptocurrency. We think this will help remove a significant part of the risks and ensure that cryptocurrency won’t be so popular.”
The move would effectively crush the crypto industry in Russia. Work on turning the recommendations into regulations is expected to begin in the spring.
“We hope that this proposal will be discussed with the industry,” co-founder of BitCluster Vitaliy Borschenko told Reuters. “The central bank’s main concern is that cryptocurrency won’t be traded in Russia and crypto mining poses no risks in this regard.”
Anto Paroian, Chief Operating Officer at cryptocurrency hedge fund ARK36, said The Bank of Russia has hinted at the possibility of a sweeping ban on crypto many times before, meaning recent rumors are “hardly surprising”.
“The ban will also outlaw any crypto mining activities,” he continued. “As this would negatively affect Bitcoin’s hashrate, some investors may be wondering whether the ban, when enforced, could result in more selling pressure on the price of this asset.
“This, however, is unlikely to happen. Russia only hosts a little more than 10% of Bitcoin's current mining power. When and if the ban is finally enforced - which could still take some time - Russian miners may be forced to move their operations elsewhere but any effect of this development on Bitcoin’s price will be extremely short-lived.”
“What’s more, the digital asset market seemed initially undeterred by the news of the ban and the major assets, including Bitcoin, continued to post modest gains throughout the day. This suggests that the development will not rattle the markets in the same way as China’s ban on crypto did last year.”
