Alexander Marrow and Elena Fabrichnaya

MOSCOW, (Reuters) – Russia’s central bank proposed on Thursday to ban mining cryptocurrency on Russian territory. It cited threats to financial stability and citizens’ well-being, as well as its monetary sovereignty.

As governments around the world worry about the impact of highly volatile, privately-operated digital currencies on their financial system control, this latest move in the global crypto crackdown is a major step forward.

Russia opposed cryptocurrencies for many years, claiming they can be used to launder money or finance terrorist activities. They were eventually granted legal status by the government in 2020, but they are not allowed to be used as payment methods nL1N2T110W.

According to a central bank report, Thursday’s publication stated that cryptocurrency’s explosive growth was primarily due to speculative demands. It also said they had the characteristics of a financial pyramid. This warning is in response the potential for bubbles on the market and financial stability.

It was suggested that banks should prevent financial institutions from using cryptocurrencies. Furthermore, said mechanisms need to be implemented to stop transactions in cryptocurrencies for fiat currency.

It also includes cryptocurrency exchanges. Binance, a cryptocurrency exchange, told Reuters that it is committed to cooperating with regulators. They also hoped the release of the report would spark dialogue with the central banks about protecting Russian crypto users’ interests.

Elizaveta Dilova, the head of financial stability at the central bank, stated that there is no plan to place restrictions on crypto currency ownership.

According to the bank, Russians are active cryptocurrency users with a transaction volume of approximately $5 billion annually.

CHINA SHADOWING?

According to the central bank, it will work with regulatory authorities in all countries where cryptocurrency exchanges have been registered to gather information on Russian clients. The central bank cited other countries’ efforts to stop cryptocurrency activity, including China.

China increased its crackdown on cryptocurrency in September with a ban blanket on crypto transactions and mining. This ban hit bitcoin and other important coins, and pressed for crypto-related stocks.

Danilova explained that at the moment, there are not plans to ban cryptocurrency like China’s. “The way we propose will work.”

Joseph Edwards from crypto firm Solrise Group was the head of financial strategies at Solrise Group. He said that it is not important and no one would lose sleep over it.

He said that Moscow, just like Beijing is constantly rattling their sabres over “crypto bans”, but Russia has not been an industry pillar in the same manner as China at times.

CRYPTO-MINING

Russia is third in the global bitcoin mining market, after the United States, Kazakhstan and the United Kingdom. However, the United States may experience a surge of miners due to tightening regulations following the unrest that occurred earlier this month.

The Bank of Russia stated that crypto mining causes problems with energy consumption. The “mine” of cryptocurrencies is done by computers with powerful processors that can compete against other machines connected to a worldwide network for solving complex math puzzles. This process consumes electricity, and often uses fossil fuels.

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

In August, Russia accounted for 11.2% https://ccaf.io/cbeci/mining_map of the global “hashrate” – crypto jargon for the amount of computing power being used by computers connected to the bitcoin network.

Moscow-based BitRiver that hosts bitcoin miners in Siberia said it does not believe a total ban on crypto is possible. However, BitRiver expects to find a balance position after different ministries have considered the options.

According to the central bank which plans to issue its digital rouble itself, crypto assets would restrict the sovereignty over monetary policy and lead to higher inflation control rates.