The Central Bank of Russia is now pushing for a wide-ranging ban on crypto-related activities, such as issuance, exchange, and mining, keeping its hardline stance on decentralised digital money.
According to a consultation paper published by the regulator, concerns over financial stability and citizens’ well-being are cited as the main reasons for the proposed restrictions.
The Russian central bank sought public feedback on a crypto-restrictive policy. In a report titled “Cryptocurrencies: Trends, Risks, Measures,” the Russian monetary authority argues for a ban on a number of crypto activities. The report was published on January 20, 2022, and the regulator will accept any comments and suggestions until March 1.
Russians conduct an annual $5 billion in crypto transactions, as highlighted in the Central Bank of Russia (CBR) paper. The paper acknowledged the rapid growth of the global crypto market over the past year. A bank noted that the value growth of cryptocurrencies is primarily determined by speculative demand, causing a bubble and the fact that they resemble a financial pyramid.
Russia’s financial system is at risk, as is its sovereign monetary policy and the well-being of its citizens as a result of the spread of these instruments. Intending to reduce these threats and risks of illegal activity, the Bank of Russia plans to collaborate with the Russian government and parliament on a number of pending legal amendments in the coming months.
Legal liability will be imposed for violations of the ban on crypto as a payment method for goods and services. As per Russian law, cryptocurrencies such as bitcoin and stable coins are prohibited as “monetary surrogates.”Now it wants to prohibit their issuance and circulation in the Russian economy, including digital asset exchanges and peer-to-peer platforms.
As for crypto investments, the central bank opposes them and intends to prevent financial institutions from investing in them. The report emphasised that Russian financial infrastructure and intermediaries should not be used to facilitate cryptocurrency transactions. Additionally, mining cannot be ignored, says the Bank of Russia, as it increases the involvement of the economy and the population in the crypto market.
According to the CBR, the current activity level and its further spread pose significant risks to the environment and energy supply. Prohibition is the best solution. Russia has become a mining hotspot amid China’s crackdown on the industry. The minting of digital currencies is not only a lucrative business; it is also an additional source of income for many households with subsidies on electricity.
Authorities have complained about increased energy consumption that strains power grids in some regions. In addition to improving its monitoring of cryptocurrency operations, the Bank of Russia intends to work more closely with financial regulators in other jurisdictions to gather information about the transactions made by Russian citizens.
As noted by Elizaveta Danilova, head of the central bank’s Financial Stability Department, the central bank’s proposal does not include restrictions on ownership of cryptocurrency outside of the country.
Last month, it stated that cryptocurrencies have no place in Russia’s financial market before presenting its view on crypto regulation in this report. According to media reports, the State Duma, the lower chamber of the Russian parliament, has set up a working group to develop proposals to regulate the Russian crypto space comprehensively.
