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Russian central bank proposes banning cryptocurrencies, crypto mining

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Moscow’s Russian central bank.

Gavriil Grigorov | TASS | Getty Images

Russia’s central bank proposed Thursday that it ban the mining and use of cryptocurrency on Russian soil. It cited threats to its financial stability and citizens’ well-being as well as its monetary policy sovereignty.

Russia has been a strong opponent of cryptocurrency for years. They claim they can be used as money laundering tools or in financing terrorism. In 2020, it gave them legal status but prohibited their use for payment.

The price of bitcoin dropped in December after Reuters reported, citing sources that Russia’s regulator was for a complete ban.

According to a central bank report, Thursday’s publication stated that cryptocurrency’s growth was mainly due to speculative demand. It also said that these cryptocurrencies had the characteristics of a pyramid financial system, and warned citizens that there could be bubbles that threaten their financial stability.

It was suggested that banks should not conduct transactions with cryptocurrency. Such mechanisms would be used to stop financial institutions from buying or selling crypto currencies for traditional currency or fiat. This ban also applies to crypto exchanges.

The central bank stated that Russians use cryptocurrency extensively, and have a $5 billion annual volume.

Russia is currently the third largest player in Bitcoin mining. This ranking follows the United States of America and Kazakhstan. But, this may change as the United States fears tightening regulation due to unrest earlier in the month.

According to the central bank, crypto mining causes problems in terms of energy consumption. Bitcoin and other crypto currencies are “mined” using powerful computers. These machines compete with others connected to the global network in order to solve difficult mathematical puzzles. It consumes electricity and can often be powered by fossil fuels.

The bank stated that the best option was to prohibit cryptocurrency mining from Russia.

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