Russia’s central bank, the Bank of Russia, has called for a ban on cryptocurrency, including the issuance, trading, investment in and mining of these digital assets.
In a 37-page consultation paper released today, the central bank said that the broadening use of cryptocurrency in Russia posed a threat to the country’s economic development.
If implemented, the ban on cryptocurrency mining will cause another bout of disruption to the global network of computers processing bitcoin transactions.
Last year, China banned cryptocurrency mining, while miners have recently faced restrictions on their activities in Kazakhstan, Iran and Kosovo.
In November, Sweden called for an EU-wide bitcoin mining ban.
According to the Cambridge Bitcoin Electricity Consumption index, 14 percent of global bitcoin mining took place in Russia in August last year.
This makes Russia the third-most popular country for mining cryptocurrency after the US and Kazakhstan.
“The current level and the further expansion of cryptocurrency mining within Russia carries significant risks for the economy and financial stability,” the Bank of Russia said in today’s paper.
Risks to economic stability
In its consultation paper, the Bank of Russia also spelled out what it sees as the negative impact of cryptocurrency on monetary policy.
According to the Bank of Russia, cryptocurrencies are more dangerous for developing markets than for developed ones.
“The potential risks from cryptocurrencies to financial stability are significantly higher in emerging markets, including Russia,” it said.
“The spread of cryptocurrency leads to citizens’ savings leaving the traditional financial sector,” the Bank of Russia went on, “restricting its ability to finance the real economy.”
The central bank also said that the growing use of cryptocurrency caused Russian interest rates to be higher than they would otherwise have been, hindering it in its efforts to combat inflation.
In its paper, the Bank of Russia called for the introduction of legal liability for those breaching its proposed ban on cryptocurrency.
It called for a ban on the issuance and trading of cryptocurrencies within Russia, as well as a ban on the investment of financial institutions’ assets in cryptocurrencies and related financial instruments.
Russia’s financial infrastructure should also be prevented from undertaking operations in cryptocurrency, the Bank of Russia said.
Improve payments instead
Instead of allowing cryptocurrencies, Russia should focus on improving its payment system, the Bank of Russia said in its paper.
“Many central banks, including the Bank of Russia, are developing their own digital currencies,” it said.
“Central bank digital currencies are a new payments infrastructure, allowing citizens, businesses and the state to complete monetary operations at minimal cost.”
“The advantages of cryptocurrencies, such as speed, convenience and the relative cheapness of monetary operations can be achieved through faster payments systems and, in future, through national digital currencies,” the Bank of Russia said.
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