Bitcoin and Co.: Russian central bank to ban cryptocurrencies

Enlarge image

Central Bank of Russia in Moscow (2019)

Photo: MAXIM SHEMETOV / REUTERS

The Central Bank of Russia has proposed to ban the use and mining of cryptocurrencies like Bitcoin on Russian territory.

The central bank cited the dangers to financial stability, the well-being of citizens and the country's monetary sovereignty as justification.

In a report published on Thursday, the central bank stated that the growth in cryptocurrencies was primarily due to speculative demand. The central bank drew the comparison to a snowball system. In the report, she suggests blocking financial institutions from doing business with cryptocurrencies. Mechanisms should be developed to exchange cryptocurrencies for conventional money. Crypto trading exchanges would also be affected.

In recent months, central bankers and financial watchdogs in numerous countries have tightened their approach to cryptocurrencies.

China and Kosovo have banned the mining of cryptocurrencies, citing the high energy consumption as justification.

But regulators also fear that the growing adoption of cryptocurrencies could pose new risks to financial stability.

For years, Russia itself had positioned itself against cryptocurrencies and justified this with the fact that they could be used for money laundering or to finance terrorism.

In 2020, cryptocurrencies were finally given legal status, but their use as a means of payment was banned.

Cryptocurrencies are popular in Russia, despite government skepticism.

According to the central bank, the annual transaction volume is around five billion dollars.

In addition, numerous crypto miners have settled in Russia.

Russia is considered the third largest player in mining after the USA and Kazakhstan.

Mining means that new units of cryptocurrencies are created with energy-consuming arithmetic operations.

This process requires a lot of electricity, which in turn is usually generated with fossil fuels.

In the report, the Central Bank of Russia also cited the high energy consumption of mining as an argument for a ban.

mic/fdi/Reuters