Russia seeks to place a ban on cryptocurrency use and mining, citing China’s example.
Russia’s central bank, which controls the third-largest bitcoin mining market, banned cryptocurrencies citing concerns about financial stability.
It cited steps implemented in other nations, such as China, which prohibits all bitcoin transactions and mining operations.
Russia’s central bank suggested Thursday prohibiting cryptocurrency use and mining on Russian soil, citing threats to financial stability, individuals’ well-being, and the country’s monetary policy autonomy.
The move is the latest in a global crackdown on cryptocurrencies, as governments from Asia to the United States fear that privately controlled and highly volatile digital currencies could erode their authority over banking and monetary systems.
Russia has railed against cryptocurrencies for years, claiming they may be used to launder money or finance terrorists. In 2020, it granted them legal status but prohibited their usage as a mode of payment.
The central bank stated in a study published on Thursday that speculative demand was primarily responsible for cryptocurrencies’ quick growth and that they exhibited features of a financial pyramid, warning of potential market bubbles endangering financial stability and citizens.
The bank advocated prohibiting financial institutions from engaging in any cryptocurrency transactions and recommending the development of measures to stop transactions involving the purchase or sale of cryptocurrencies for fiat currencies.
Cryptocurrency exchangers are included in the proposed prohibition. Binance, a cryptocurrency exchange, said Reuters it was committed to cooperating with regulators and hoped the report’s release would spark discussion with the central bank about safeguarding the interests of Russian cryptocurrency users.
There are no plans to impose restrictions on cryptocurrency ownership, according to Elizaveta Danilova, head of the central bank’s financial stability section.
Russians are active bitcoin users, the bank claimed, with an annual transaction volume of roughly US$5 billion.
China in the background?
The central bank stated that it would collaborate with regulators in countries where crypto exchanges are registered to collect data on Russian clients’ transactions. It cited other governments’ efforts to rein in cryptocurrency activity, such as China.
China further up its assault on cryptocurrencies in September, imposing a blanket ban on all crypto transactions and mining, weighing on bitcoin and other major coins and putting pressure on crypto and blockchain-related equities.
“At the moment, there are no intentions to ban cryptocurrencies in the same way that China did,” Danilova added. “The strategy we have suggested will suffice.”
Crypto Currency Mining
Russia is the third-largest bitcoin mining country in the world, after the United States and Kazakhstan, but the latter may see a miner exodus due to concerns about stricter regulation in the aftermath of turmoil earlier this month.
The Bank of Russia stated that crypto mining was causing issues with electricity use. Bitcoin and other cryptocurrencies are “mined” by powerful computers competing against one another on a global network to solve complicated mathematical riddles. The process consumes a great deal of electricity and is frequently fueled by fossil fuels.
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“The ideal answer is for Russia to prohibit cryptocurrency mining,” the bank stated. In August, Russia accounted for 11.2 percent of the global “hashrate” — crypto lingo for the amount of computational power used by bitcoin-connected computers.
BitRiver, a Moscow-based company that manages data centers in Siberia that house bitcoin miners, said it did not believe a complete crypto ban was feasible, predicting a more balanced view would emerge once several ministries discussed the suggestions.
The central bank, which plans to launch its own digital rouble, stated that broad use of crypto assets would erode monetary policy’s sovereignty, as higher interest rates would be required to curb inflation.
This is merely a proposal, and the market appeared to shrug it off yesterday, and the market has clearly pulled back today. Bitcoin is down around 8%, while Ethereum is down 7%.
However, this is a requirement of the course. The reality is that governments and central banks worldwide are terrified and extremely concerned about this emerging digital-currency asset class challenging their monetary authority. That is, in many ways, validation.
At the end of the day, you definitely do not want governments to entirely prohibit this type of digital asset. At the same time, it does provide that critical validation, which is a result of crypto’s growth.
If your investment horizon is one, three, five, or ten years, cryptocurrencies reign supreme. They have historically been the best-performing asset type. Thus, on a one-year timeframe, you and I both know that no one can predict precisely where crypto will end up.
However, if you look at the longer-term price chart and the brain drain, I believe that is the most important thing to consider — a number of developers, a number of extremely intelligent individuals from finance literally ranging the spectrum, leaving other industries to enter the crypto space, building decentralized apps, and all the rest.
That is what excites me the most about the much longer-term crypto investing prospect.
Monetary policy is a collection of activities that a country’s central bank can take to manage the country’s overall money supply and promote sustainable economic growth. It often entails decreasing or raising interest rates in order to stimulate or restrain spending.
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