Bank of Russia seeks China-like ban on cryptocurrencies and crypto-related activities

  • The central bank of Russia has proposed a  ban on cryptocurrencies and all other activities related to them.
  • Citing financial and welfare risks, the bank has proposed ways in which the country can do away with the industry. 

Once again, the Central Bank of Russia (CBR) is seeking restrictions on the crypto industry, this time on an array of crypto-related activities. 

In a Thursday document entitled “Cryptocurrencies: Trends, Risks, and Measures,” the bank calls on a country-wide ban of crypto issuance, trading, and mining. As it has done previously, the bank cites risks to financial stability and citizens’ wellbeing as reasons for its stance.

Of note, the bank begins by acknowledging the rapid growth of the digital asset industry in Russia during the past year. Here, it references its own November review showing that annual crypto transactions in the country now reach $5 billion.

However, the bank says such growth is largely due to speculative demand, which is growing into a bubble. Cryptocurrencies also have the features of a financial pyramid, it adds. And as the country’s highest monetary authority, the bank is convinced crypto-assets pose a risk to Russia’s financial system, monetary policy sovereignty, as well as citizens’ welfare.

Related: Largest bank in Russia launches country’s first blockchain ETF

Ban anything and everything crypto: Bank of Russia

As a mitigation measure, the bank intends to collaborate with the Russian government and its parliament on several proposed legislations. Among them, is the introduction of legal liability to those who violate the ban on using crypto for payment. 

In the past, the regulator has classified digital assets as “monetary surrogates,” which are illegal under Russian law. For this reason, it now seeks to ban their issuance as well as circulation on Russian grounds. This would halt the activities of crypto exchanges and peer-to-peer crypto platforms in the country.

Last year, the bank of Russia sought to prohibit investments made on cryptocurrencies, and crypto-based financial instruments by blocking related card payments. It also specifically wanted crypto investment restrictions imposed on mutual funds. The regulator’s latest report reiterates this viewpoint, saying the Russian financial infrastructure and intermediaries should steer clear of crypto transactions. Digital assets have “no place” in the country’s financial market, the CBR noted previously.

As for mining, the CBR has it that the activity poses significant risks to the environment and the nation’s energy supply. Mining also increases crypto involvement by the Russian population and economy. Notably, the scale of crypto mining operations rose in the oil-rich country following China’s crackdown. However, authorities in some regions have complained of high energy consumption and a strained power grid.

As further enforcement, the Bank of Russia plans on partnering with financial regulators in other jurisdictions. They would contribute by, for instance, providing information on crypto transactions made by Russian citizens. Its report, however, does not prohibit owning digital currencies outside Russia.

The regulator’s proposed restrictions are now pending comments and suggestions to be made on March 1. Reportedly, various Russian government institutions seek regulation rather than a complete ban as proposed by the bank. The State Duma (lower house of the Russian parliament) has developed a working group that is currently preparing proposals on the regulation of the industry. 

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