On Thursday, the Central Bank of Russia Federation, Russia’s apex bank proposed banning the use of and mining of cryptocurrencies in the country. The apex bank cited a number of reasons for its proposal including threats to financial stability, the country’s monetary policy sovereignty, the wellbeing of citizens, etc.
Cryptocurrencies, especially Bitcoin, have been facing strong aversion for a long list of reasons and Russia would be joining a list of countries that have banned cryptocurrencies if it declares them banned and illegal. Governments are of the opinion that cryptocurrencies, which are privately held and operated without the knowledge and interference of the government, could undermine the power held by the government over the financial and monetary systems.
For a long time now, the issue of cryptocurrencies has been a controversial debate among lawmakers. Cryptocurrencies have been argued to be used to fuel activities related to money laundering and terrorism (a common reason for banning cryptocurrencies by governments). In 2020, cryptocurrencies were given legal status in the country but were disallowed from being used as a means of payment.
A report published by Russia’s apex bank on Thursday mentioned that cryptocurrencies rapid growth is hugely dependent on speculative demand and that they exhibited characteristics of a financial pyramid causing them to be super volatile, making them a threat to the citizens and the nation.
The proposal is pushing for quite a number of things including stopping financial institutions from dealing in cryptocurrencies in any way, developing systems that barricade the purchase and sale of cryptocurrencies, stopping crypto exchanges from working in the country, etc.
The imminent ban could affect a lot of things. For instance, more than $400 billion worth of cryptocurrencies were lost thanks to the China ban on cryptocurrencies.
Cryptocurrency platform Binance has since reacted to the report from the apex bank. The platform hopes that it will be able to reach a conclusion with regulators that’ll protect its users and ensure it continues to run.
Russia is the world’s third-biggest hub for mining the largest cryptocurrency Bitcoin. Russia’s central bank says that mining activities have been consuming power in the country and continue to be a challenge to the country’s energy sector. “The best solution is to introduce a ban on cryptocurrency mining in Russia”, the bank said.
Like China, Russia could stop being a paradise for Bitcoin mining and force miners to seek other places with favourable regulations.
Like other countries, especially those that have banned cryptocurrencies, Russia’s central bank plans on issuing its own central bank digital currency soon.