Russian c-bank supports prohibition of cryptocurrency mining
The Central Bank of Russia today posted a consultation paper addressing cryptocurrencies (unbacked cryptocurrencies and stablecoins), that is, digital currencies as defined in Russian legislation, as well as digital financial assets (DFAs) that may be used in a foreign jurisdiction to make payments (money substitutes).
In order to mitigate threats associated with the expansion of cryptocurrencies, the Bank of Russia proposes the following amendments to the Russian legislation:
- Establish liability for the violation of the statutory ban on using cryptocurrencies as a mean of payment for goods, works and services sold and bought by Russian residents, whether legal entities or individuals.
- Prohibit the organisation of the issue and/or the issue and the organisation of circulation of cryptocurrencies (including by cryptocurrency exchanges, cryptocurrency exchange offices, and P2P platforms) on the territory of the Russian Federation and establish liability for breaching this ban.
- Prohibit financial institutions’ investment in cryptocurrencies and related financial instruments, as well as the use of Russian financial intermediaries and Russian financial infrastructure to conduct cryptocurrency transactions, and stipulate liability for violating this ban.
The central bank also outlines possible actions regarding crypto mining. For some types of cryptocurrencies, mining involves, among other things, the issuance of a cryptocurrency and / or the receipt of a cryptocurrency as a reward for validating transactions. Mining cannot be ignored in the report, since it increases the involvement of the population and the economy as a whole in the cryptocurrency market.
The Bank of Russia believes that the current scale and further spread of cryptocurrency mining in the Russian Federation entails significant risks for the economy and financial stability:
- Cryptocurrency mining creates unproductive consumption of electric power, which threatens the power supply of residential buildings, social infrastructure and enterprises and the implementation of Russia’s environmental agenda.
- Cryptocurrency mining creates the demand for infrastructure needed to conduct cryptocurrency transactions, which exacerbates the negative effects of the spread of cryptocurrencies and creates incentives to circumvent regulation.
In this regard, the Bank of Russia believes that the prohibition of cryptocurrency mining in Russia could be the best solution.
According to some estimates, the amount of Russian citizens’ transactions with cryptocurrencies reaches $5 billion per year. Russian individuals are active users of online cryptocurrency trading platforms. Moreover, Russia is one of the global leaders by mining capacity.