Russia's financial regulator has proposed a ban on cryptocurrency-related activities such as trading and mining in the country. To back this proposal, it released a report outlining crypto's potential use for criminal activity and the high energy requirement of crypto mining.
The Central Bank of Russia (CBR) publicized its crypto report on Jan. 20, via an online press briefing. Elizaveta Danilova, director of CBR's financial stability department, led the virtual press conference. She presented the report's findings alongside its conclusion – a total crypto ban in Russia.
The CBR report proposed blocking financial institutions in Russia from carrying out any crypto-related operations. It also pointed out the need for mechanisms to block transactions involving the exchange of crypto for fiat currencies. Danilova clarified, however, that CBR has not yet considered imposing restrictions on owning cryptocurrencies.
The director also pointed out that Russia is not planning a total crackdown on crypto – in the same vein as China. "For now, there are no plans to ban cryptocurrencies similar to the experience of China. The approach we have proposed will suffice."
CBR said in the report that "speculative demand" was driving crypto's rapid growth. It added that crypto showed characteristics of a financial pyramid, similar to a Ponzi scheme. The regulator warned that potential bubbles in the crypto market could threaten financial stability and citizens.
Furthermore, CBR noted that crypto assets becoming widespread would limit the sovereignty of monetary policy – with higher interest rates needed to contain inflation. Russians have an annual crypto transaction volume of about $5 billion, it added. (Related: Bank predicts Bitcoin will be wiped out by Russia and China, crashing to just $1,000 as the bottom falls out of crypto mania.)
According to the regulator, cryptocurrencies have become widely used in illegal activities such as fraud. It echoed sentiments by Moscow for years now that cited crypto's potential use in money laundering or financing terrorism. While Russia gave crypto legal status in 2020, it was prohibited as a means of payment.
CBR zeroing in on high-energy crypto mining
CBR also added in its report that crypto mining created problems when it comes to energy consumption. Bitcoin and other cryptocurrencies are "mined" by powerful computers that solve complex mathematical puzzles while on a global network, competing with other machines worldwide. Fossil fuels often power this energy-intensive process.
Russia ranks third when it comes to crypto mining, lagging behind the U.S. and Kazakhstan. It accounted for 11.2 percent of the global hash rate, or computing power utilized by machines hooked to the crypto network.
Given this, CBR acknowledged the impact of crypto mining operations on Russia's energy usage. It concluded in the report that "the best solution is to introduce a ban on cryptocurrency mining in Russia."
While Russia proposed a ban on crypto mining, the southeastern European country of Kosovo went ahead and prohibited the activity. The Jan. 4 crypto mining ban implemented amid Kosovo worst power shortage in decades sought to reduce the former Yugoslavian territory's energy consumption.
"All law enforcement agencies will stop the production of this activity in cooperation with other relevant institutions that will identify the locations where there is cryptocurrency production," the country's Economy and Energy Minister Artane Rizvanoll said in a statement. (Related: Kosovo BANS crypto mining in order to save energy during power shortage.)
She added that the decision to ban crypto followed the recommendation of Kosovo's Technical Committee on Emergency Measures for Energy Supply. "These actions are aimed at addressing potential unexpected or long-term lack of electricity production capacities, transmission capacities or distribution of energy in order to overcome the energy crisis without further burdening the citizens of the Republic of Kosovo," Rizvanolli explained.
Kosovo has become a favorite destination for young crypto miners in recent years due to its relatively affordable energy prices. The northern part of the country has seen a rise in the activity, with Serbs heavily responsible for it. Serbian crypto miners do not recognize Kosovo's independent status and refuse to pay for the electricity they consume.
Watch the video below of David Morgan and John Perez talking about Russia potentially banning all crypto.
This video is from The Morgan Report channel on Brighteon.com.
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