Governments and central banks are mostly skeptical about cryptocurrencies. Now, the Central Bank of Russia has taken a clear position and proposed to ban both the use and the creation of cybercurrencies on Russian territory.
• Russia’s central bank calls for a ban on crypto trading and mining
• The high power consumption of mining is increasingly coming into focus
• Telegram founder sees more advantages than disadvantages in the crypto industry
On Jan. 20, the Central Bank of Russia released a report advocating banning financial institutions from conducting cryptocurrency transactions, i.e. buying or selling cryptocurrencies for traditional fiat money. In addition, according to the currency watchdogs, crypto exchanges should also be banned. So far it is uncertain whether the government in Moscow will follow this request.
Numerous concerns..
The Russian monetary watchdogs cited a variety of reasons for the required ban: According to this, cryptocurrencies were only used for speculative purposes and also had all the characteristics of a Ponzi scheme. They are also often used for money laundering, drug trafficking or extortion, the report said.
More serious, however, is probably that, according to the central bank, cryptocurrencies endanger financial stability, the well-being of citizens and the monetary sovereignty of the state. Potential risks to financial stability associated with cryptocurrencies are „much higher for emerging markets, including Russia,“ according to monetary authorities.
It is also said that crypto mining causes energy problems. Because the coins are generated by solving cryptographic tasks on a blockchain. In return for providing their computing power, the so-called „miners“ receive a certain amount of newly generated bitcoins for each block generated. In the meantime, the computing tasks in the Minig have become so complex that huge, powerful server farms that require a lot of electricity are used. However, this enormous power consumption also increases environmentally harmful CO2 emissions, especially when fossil fuels such as coal are used to generate electricity. In light of this, the Central Bank of Russia argues that mining harms Russia’s green agenda and threatens energy supplies. According to Reuters, Russia is the world’s third largest player in bitcoin mining, behind the United States and Kazakhstan.
Crypto rejection in other countries as well!
Russia is not the only country where bitcoin and co are encountering headwinds due to their energy intensity. For example, China already banned crypto transactions at the end of September 2021. The high energy consumption of mining is also a thorn in the side of the Middle Kingdom, which is why the authorities took countless Bitcoin mining farms offline.
Kosovo, which is suffering from an electricity crisis, has also banned cryptocurrency mining on its territory. And in Russia’s neighboring state of Georgia in January, citizens were tricked into taking a sacred oath to stop mining cryptocurrency. Such promises are traditionally considered unbreakable bonds there. The background is that the country is currently struggling with severe power disruptions, which are blamed on Bitcoin mining.
Telegram founder rejects crypto ban!
In Russia, cryptocurrencies have faced state resistance for years. For example, Moscow has banned their use as a means of payment. Nevertheless, they enjoy great popularity among users. The central bank gave the annual transaction volume at around five billion US dollars.
The general ban on domestic crypto trading and mining demanded by the central bank was unsurprisingly met with some fierce criticism. For example, according to BTC ECHO, Telegram founder Pavel Durov said: „Such a ban will hardly stop unscrupulous actors, but it will put an end to legal Russian projects in this area“. The consequence would be a slowdown in the development of blockchain technologies in general, on which Russia is dependent.