Like many governments, Russian financial regulators have had a complicated relationship with cryptocurrencies. Back in October, Russian leader Vladimir Putin praised cryptocurrencies as a possible tool to help dismantle the global dollar-based financial system.
That didn't stop Russia from barring the use of cryptocurrencies for payment. And now the country's financial regulators are pushing for a China-style ban on crypto mining, something that could disrupt the international network supporting popular cryptocurrencies like bitcoin and ethereum. In a report published Thursday, the Russian Central Bank called for a full ban on crypto. Its findings were presented during an online press conference led by Elizaveta Danilova, the director of the Bank of Russia's Financial Stability Department.
The report claimed cryptocurrencies have become widely used in illegal activities like fraud (in the west, they have become closely associated with ransomware attacks like the one that shut down the Colonial Pipeline and JBS). Because of this, Russia needs new laws that would effectively ban any crypto-related activities in the country. This ban should apply to exchanges, over-the-counter trading and peer-to-peer trading, the report said.
The bank, therefore, suggest Russia needs new laws and regulations that effectively ban any crypto-related activities in the country. In particular, cryptocurrency issuance and organization of its circulation in Russia must be banned. The ban should apply to exchanges, over-the-counter trading desks and peer-to-peer platforms. Russian institutional investors should not be allowed to invest in crypto assets and no Russian financial organizations or infrastructure should be used fro cryptocurrency transactions. And the existing ban on crypto payments should be more aggressively enforced.
But the biggest issue highlighted in the report is mining, which has flourished across Russia in recent years. Presently, Russia is the third-largest player in bitcoin mining, behind only the US and former Soviet Republic Kazakhstan. But, as Reuters points out, miners in Kazakhstan have been looking for greener pastures ever since the start of the latest round of unrest. As of August 2021, Russian miners accounted for 11.2% of the bitcoin network's hashrate.
The RCB report claimed the proliferation of mining operations across Russia had created problems for energy consumption. Because of this "the best solution is to introduce a ban on cryptocurrency mining in Russia."
Not only did the report also characterize crypto as a sophisticated Ponzi scheme (where price growth is driven by attracting new investors in a pyramid-like fashion), it also claimed crypto is a threat to the "sovereignty" of Russia's monetary policy, the report claimed.
Back in September, China intensified its crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining. The news briefly hit bitcoin and crypto prices.
Russia is also following in China's footsteps in another important way: The Russian central bank is working on a "digital ruble", a central bank-backed digital currency similar to the "e-RMB".
Back in the US, some twitter users scoffed at Russia's push to suppress crypto while using the core technology for its own purposes.
I thought the aim was monitoring the public. Can someone please get me a new totalitarianism playbook? https://t.co/wj0b1FMJwe— Danielle DiMartino Booth (@DiMartinoBooth) January 20, 2022
Others mocked the notion that such a crackdown could ever be successful (although the CCP has done a pretty good job over in China).
The report found that cryptocurrencies are volatile and used widely in illegal activities like fraud. Russia has already banned the use of cryptocurrency for payments
BREAKING NEWS!!!— SpoilleR_X (@SpoilleR_X) January 20, 2022
EXCLUSIVE VIDEO OF RUSSIA TRYING TO STOP CRYPTO!! pic.twitter.com/awflHsu3PW
At one point, Russia's parliament and central bank had half-heartedly embraced crypto.
Whether the government now follows through with this crackdown remains to be seen.
Interested parties can find the full report below (beware: it's written in Russian):