Russia, one of the world’s biggest centers for Bitcoin mining, has proposed a ban on all cryptocurrency operations in the country – a move that would outlaw the purchase of crypto for fiat currency, and stop financial institutions from carrying out any operations with cryptocurrencies.
In a report published Thursday, the country’s central bank compared cryptocurrencies like Bitcoin to a pyramid scheme, noting that “their price growth is largely supported by demand from new entrants to the market.” Cryptocurrency's completely bonkers volatility, which is a feature, not a bug, was also noted in the report as being "defined primarily by speculative demand for future growth, which creates bubbles" – thus threatening financial stability and citizens' wellbeing.
“We consider it very important to ban using Russian financial infrastructure to obtain cryptocurrency,” said Elizaveta Danilova, head of the central bank’s financial stability department, per the Financial Times. “We think this will help remove a significant part of the risks and ensure that cryptocurrency won’t be so popular.”
At the moment, an estimated $5 billion worth of transactions are carried out using cryptocurrency in Russia, with the country accounting for more than one-ninth of the global “hashrate” – that is, the amount of computing power being used by cryptocurrency networks. While the actual ownership of cryptocurrencies will not be made illegal, Danilova warned that regulators would be monitoring their use.
The crackdown comes not long after a similar move from China in September last year. After years of increasingly strict anti-cryptocurrency regulation, the Chinese central bank finally outlawed all cryptocurrency transactions, effectively banning them outright. More recently, regulators from the EU have come out in support of banning the energy-hungry "proof of work" mining practice.
As with the move from China, Russia's proposal has sent crypto prices tumbling – bitcoin prices are currently at their lowest since last August. Some cryptocurrency enthusiasts believe a full ban on cryptocurrency is unlikely in Russia, and expect a “more balanced” position to emerge once the proposal has been discussed in more depth, Reuters reports.
Like China, Russian officials are citing the country’s goals of carbon neutrality as one reason for the move – cryptocurrency mining operations worldwide currently use more energy than many entire countries. The central bank also said that cryptocurrency could increase inflation in the country by “limiting the sovereignty of monetary policy” – which may be why the bank is reportedly planning to issue its own digital rouble later this year.
Meanwhile, Elvira Nabiullina, Russia’s central bank governor, told the Financial Times that she has long been a critic of cryptocurrencies’ notorious use in the black market.
“There are big risks of cryptocurrencies being used for money laundering and illegal operations, and we’ve spent a lot of effort on clearing the financial system of illegal and dubious operations,” she told the Financial Times last year. “A significant number of the bank licenses we revoked were because they were doing dubious things like this.”
“We already defeated this problem,” she added. “[We] don’t want to let it in through the back door.”