Central bank of Russia calls for outright crypto, mining ban; Favors CBDCs

Lavina Daryanani
Source: Swimming World

On Thursday, Russia’s central bank proposed banning the use and mining of cryptocurrencies in the Russian territory. It specifically outlined the threats it brought to financial stability, citizens’ wellbeing, and its monetary policy sovereignty.

The report, “Cryptocurrencies: trends, risks, measures,” was presented during an online press conference with Elizaveta Danilova, the director of the Bank of Russia’s Financial Stability Department.

The report stressed the asset’s volatile nature and how the same made any regulator’s job of maintaining optimal monetary policies harder.

As a solution to the same, the bank suggested that Russia now needed new laws and regulations that could effectively ban any crypto-related activity in the country. Right from issuance to circulation, an outright ban was proposed, leaving no stone unturned – the prohibition would apply to exchanges, OTC trading desks, and P2P platforms.

What’s more, the report also suggested that the existing ban on using crypto for payments should be reinforced and punishment should be introduced for buying or selling goods, services, and labor by Russians.

It also delved into the do-s and don’t-s for institutional players – They shouldn’t be allowed to invest in crypto assets nor should any Russian financial organizations or infrastructure be used fro crypto transactions.

Notably, The Bank of Russia has already barred mutual funds from investing in cryptos. Now, it intends to prescribe punishment for breaking this ban.

Russia’s historic anti-crypto stance

Russia has been anti-crypto for years and has always constructed its arguments aligning with how cryptos could be used in money laundering and to finance terrorism. It did give this novel monetary variant a legal status in 2020 but banned their use as a means of payment.

Russians are, however, active cryptocurrency users, and as per the regulator, it recorded an annual transaction volume of about $5 billion.

What about mining?

Well, it is a known fact that Russia is also the world’s third-largest player in bitcoin mining, currently behind the US and Kazakhstan. But it might not hold this record for long.

Mining creates a fresh supply of cryptocurrencies, and in effect, stimulates the demand for other crypto-centric services.

“[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.”

As far as the solution was concerned, the report noted,

“The best solution is to introduce a ban on cryptocurrency mining in Russia.”

As per prominent Bloomberg reporter Walter, the same has however not yet been discussed with the government.

Parallelly, Bitcoin mining also faces a threat in Sweden as an EU regulator recently proposed a ban citing similar reasons.

The CBDC twist to the ban tale

The Russian regulator was, however, in support of CBDCs and said that it would quench the thirst of the Russians for fast and cheap digital payment options, effectively giving them advantages of crypto without crypto.

It also believes that in the future, the digital ruble would end up enhancing Russia’s banking infrastructure.