Russian central bank looking to ban cryptocurrency

Russia is considering becoming the latest country to ban cryptocurrency over a raft of concerns about its impact.

Russia is considering banning cryptocurrency altogether over concerns of the impact on the environment and also the ability of users to escape financial regulations.

According to a report released by the country’s central bank on Thursday local time, cryptocurrency mining and trading goes against Russia’s green agenda and can be used in money laundering or to finance terrorism.

The report estimated the cryptocurrency industry generated $7 billion a year in Russia.

Cryptocurrency has a lot in common with a pyramid scheme, according to the bank, which also called for crypto rule breakers to face the full penalty of the law.

Although the bank’s suggestion to clamp down on cryptocurrency is just that — a suggestion — Russia appears to be fast-tracking parliamentary sessions so that a potential ban could come into effect as soon as possible.

Speaker of the lower house of parliament Vyacheslav Volodin revealed this week that lawmakers were creating a regulatory framework on cryptocurrency that will be ready in time for the Russian parliament’s spring session.

Russia is hoping to ban all cryptocurrencies including these, which make up the top 10 by market capitalisation.

Under the proposal, cryptocurrency wouldn’t be able to be created, mined or traded on Russian soil — including blocking customers from using crypto exchange platforms.

Russians with offshore accounts would still be able to trade cryptocurrency.

Were Russia’s proposal to go ahead, it would be a major blow to the cryptocurrency market around the world.

Russian citizens make up the third-largest number of crypto miners, behind the US and Kazakhstan.

Blockchain miners have made the most of Russia’s unique resources to maximise their mining, with people flocking to the country’s north and Siberia to mine blockchain, because power is cheap over there.

“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia,” the central bank said.

It also cited environmental concerns for continuing to allow cryptocurrency to be mined and traded in an unregulated setting.

Bitcoin alone produces 36.95 megatons of CO2 annually through its transactions – similar to New Zealand’s entire carbon footprint.

“The best solution is to introduce a ban on cryptocurrency mining in Russia,” the bank concluded.

An employee inspects machines at a Russian crypto mining site. Picture: Olga Maltseva/AFP

Russia has never been a fan of cryptocurrency, with this not being the first time regulation attempts spooked the crypto community.

In 2020, Russia would not allow cryptocurrency to be used to pay for things in the nation.

In December, the government banned investment firms from putting any money in cryptocurrency exchanges.

It’s not the only country to consider tightening regulations and even banning the blockchains.

Australia’s finance watchdog is calling for greater regulations and over in the US, the Federal Reserve is eyeing off greater restrictions some time this year.

China went a step further and completely banned all things crypto at the end of September last year in a major tech crackdown.

“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said at the time.

The central bank said offenders would be “investigated for criminal liability in accordance with the law”.

It criminalised all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives and “illegal fundraising”.

Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh have also banned cryptocurrency.

In November, Indonesia also banned cryptocurrency for its entire Muslim population because it contained “elements of wagering”.