Central Bank of Russia calls for outright ban on cryptocurrencies

Considering cryptocurrency trading and mining in Russia as a hostile regulatory risk, the country’s central bank on Friday announced a blanket ban on cryptocurrencies calling them “volatile and widely used in illegal activities” and a threat to the financial stability of the country along with citizens’ wellbeing and the sovereignty of its monetary policy.

According to the report named ‘Cryptocurrencies: trends, risks, measures,’ the cryptocurrencies “offer an outlet for people to take their money out of the national economy, thereby undermining it and making the regulators job of maintaining optimal monetary policies harder.”

Earlier, the Central Bank of Russia announced its plan to collect information from commercial banks concerning certain private money transfers, including details of clients who are involved in crypto trading both in the country and abroad.

Although the country granted legal status to cryptos in 2020, Russia has rejected accepting cryptocurrencies as a mode of payment in exchange for goods and services. Moreover, as per the latest report, people disobeying this norm will be handed over additional penalties.

The Central Bank of Russia is in talks to introduce its own digital currency (CBDC) or the digital ruble. The country believes that this is the future of banking in the country, considering the citizens’ need for quick, efficient and cheap payment options.

The country also aims to get rid of its financial infrastructure of cryptocurrency. The latest report also stated that apart from the continuing ban on Russian mutual funds with regards to investing in cryptocurrency, the country’s institutional investors should not invest in crypto, and also the country’s financial organisations should hold crypto as a part of their asset. Penalties have been registered for those flouting these rules.

Additionally, the report states that restrictions on any crypto-circulation in the country by banning online crypto exchanges, over-the-top counter trading desks, and peer-to-peer platforms raised questions on clipping its issuance.

Russia appears to be a major cryptocurrency mining hub with 11.23% registered in the Cambridge Bitcoin Electricity Mining Index. The report along with calling out for an outright ban to be the “best” and “optimal” solution for Russia, also focuses that 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.”