Russia’s Central Bank wants to ban crypto mining and trading

Russia’s Central Bank released a report titled, “Cryptocurrencies: trends, risks, measures,” that suggests banning crypto mining in Russia, as well as all other transactions using unsecured cryptocurrencies and stablecoins. This would include buying, selling, and exchanging cryptocurrencies, including bitcoin. The proposed ban would also prohibit providing cryptocurrency storage services, but it would not place restrictions on ownership (in other words, Russian citizens won’t be forced to close their crypto accounts just yet).

No, it’s not. So far, Russia has only banned using cryptocurrency as a means of payment (this happened back in 2020). This means that although cryptocurrencies have legal status in Russia, you can’t use them to pay for work, goods, or services. However, rules regarding the organization of crypto mining and the circulation of cryptocurrencies have yet to be spelled out in federal laws.

We don’t really know. According to Bloomberg, this initiative came from the FSB: allegedly, the security service has insisted on a complete ban of all cryptocurrency transactions in Russia, in order to undermine the financing of “foreign agent” media outlets, “undesirable” organizations, and the opposition. In its report, the central bank justifies the need for restrictions by citing a range of “significant threats” to the state and Russian citizens.

The central bank lists everything from financial to environmental threats. Here’s just a few examples: 

• The high risk of losing your savings or investments in cryptocurrencies that aren’t backed by any assets;
• Cryptocurrencies bear a general resemblance to financial pyramids, since “their value growth is supported by demand from new participants in the market”;
• Stolen cryptocurrency is difficult and sometimes impossible to get back;
• The Russian population purchasing cryptocurrencies leads to an outflow of capital from Russia and a weakening of the ruble;
• In the context of their widespread use (“cryptoization”), even the potential ability to buy cryptocurrencies can lead to “the erosion of currency circulation and the loss of sovereignty of the national currency.”
• The anonymity of some cryptocurrencies makes them attractive for laundering money and performing illegal transactions — like buying drugs;
• Hype drives the popularity of cryptocurrencies among young people, who are largely unaware of the risks of such investments;
• So much electricity is spent on mining crypto in Russia that it can put in jeopardy “the power supply to residential buildings, social infrastructure buildings, and enterprises, as well as the implementation of the environmental agenda of the Russian Federation”;
• Finally, due to the increased demand for video cards among crypto miners, they are now very difficult to purchase. 

(Incidentally, this isn't the first time Russia’s Central Bank has offered advice on improving financial literacy and combating possible threats.)

No, blockchain won’t be banned. And not just because it’s actively used in two of Russia’s alternative online voting systems. In fact, the central bank hopes that with the help of blockchain, it will be able to use some of the advantages of cryptocurrency — such as speed, convenience, and the low cost of transactions — when developing a digital ruble.

Crypto users would still be allowed to own cryptocurrencies, but only outside of Russian jurisdiction — on foreign platforms. Under the proposed ban, all operations involving crypto mining or circulation would be prohibited on the territory of the Russian Federation. So, for example, you wouldn’t be able invest bitcoins through the mobile apps of Russian banks. 

However, in the future, the Russian authorities may try to control Russian citizens’ activity on foreign platforms, as well. Theoretically, the central bank could set up an information exchange with foreign regulators and thereby obtain data on Russian clients’ transactions on crypto exchanges (like the Chinese authorities have done). That said, this is still a long way off.

We don’t really know. But bitcoin miners can be found by tracking excessive electricity consumption. And those offering to exchange cryptocurrencies for cash can be identified through controlled buys. 

It’s difficult to say. At present, the central bank is hoping for the introduction of administrative fines, rather than criminal liability.

We don’t know. The central bank’s aforementioned report was presented as a “public consultation report,” but it was clearly addressed to legislators, as well as the general public. Representatives of Russia’s Central Bank has asked industry representatives and other interested parties to study the report carefully and answer the following questions:

1. Do you agree with the above list of risks and threats associated with cryptocurrencies? Do you note any additional risks or threats?
2. Do you support the report’s conclusion that the optimal regulatory strategy is to ban the use of Russian infrastructure and intermediaries for cryptocurrency transactions, as well as the infrastructure that ensures the issuance, circulation, and exchange of cryptocurrencies?
3. What arguments may point to the need for even more stringent regulation (for example, the similarities to China’s experience)?
4. What potential problems do you foresee in implementing the proposed approach to regulating cryptocurrency?
5. Which measures, in your opinion, might improve the effectiveness of monitoring the cryptocurrency market?

Sure you can! Just send them an email at any of the following addresses before March 1: 

• [email protected]
• [email protected]
• [email protected]

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