Russia's Central Bank proposes ban on cryptocurrencies, claims threat to financial stability

Russia’s Central Bank has proposed banning cryptocurrencies on Russian soil. If the Russian administration honors the proposal, it would become illegal to mine, trade, invest and exchange any Digital Payment Tokens, commonly known as cryptocurrencies, in Russia. The apex banking authority has claimed that cryptocurrencies are a direct threat to Russia’s financial stability.

Apparently following in China’s footsteps, Russia is mulling the idea of banning crypto transactions and mining. Elizaveta Danilova, head of the Central Bank's financial stability department has, however, assured, “For now there are no plans to ban cryptocurrencies similar to the experience of China. The approach we have proposed will suffice.”

Russian crypto-miners trail only behind the United States and Kazakhstan. In other words, Russia is the world's third-largest player in bitcoin mining. The country contributed about 11.2 percent of the global “hash-rate” or computing power to mine cryptocurrencies. The Central Bank has indicated that Russians have an annual cryptocurrency transaction volume of about $5 billion.

The Russian Central Bank has opined that “speculative demand primarily determined cryptocurrencies' rapid growth”. Apparently, this has the traits of a pyramid scheme, wherein only the early investors reap the benefits. The bank further cautioned about “potential bubbles in the market, threatening financial stability and citizens.”

As a precautionary measure, the apex banking authority in Russia has reportedly proposed preventing financial institutions from carrying out any operations with cryptocurrencies. Simply put, no banks or exchanges would be able to buy or sell digital tokens using fiat currency. Additionally, Russia just might make cryptocurrency mining illegal as the Central Bank has also expressed concerns over excessive energy consumption.

There’s no clear indication about owning any cryptocurrency. In other words, owners of Bitcoin, Ethereum, and other crypto tokens could still legally own their digital assets. If the proposal is accepted, owners won’t be able to sell their assets in Russia or exchange them for Rubles.

It appears countries are taking a very cautionary approach to cryptocurrencies. While China is cracking down on digital tokens, Singapore has merely banned advertisements and promotions of cryptocurrencies. Previously, Russia wanted to regulate cryptocurrency mining, but it appears a new plan is brewing.

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