The Central Bank of Russia yesterday proposed to ban the use and mining of cryptocurrencies on the territory of the country. The proposed ban affects cryptocurrency exchanges.
The reason why the Central Bank of Russia proposes to ban the use and mining of cryptocurrencies
As of 16:49 UTC yesterday, BTC was trading at $43,324, up 3% in one day, cutting weekly losses to less than 2%.
The Bank of Russia cites threats to financial stability, economic security and monetary sovereignty to justify the move.
The bank’s report argues that the growth of cryptocurrencies is a product of speculative demand, that these assets are similar to financial pyramid schemes, and that a market bubble could form, which would endanger risks for both users and the Russian financial system.
The report said: “The potential risks to financial stability associated with cryptocurrencies are much higher for emerging markets, including Russia.”
The report adds that this is due to “a traditionally higher propensity to save in foreign currencies and insufficient financial literacy”.
Therefore, the proposal covers financial institutions and prevents them from trading cryptocurrencies. Since these measures aim to block transactions related to buying or selling cryptocurrencies for fiat, the ban also includes domestic crypto exchanges.
In addition, the report claims that mining is threatening the country’s energy supply as well as the country’s green energy plans, among other things.
“The Central Bank of Russia has no plans to introduce a ban on the use of cryptocurrencies against individuals, as Elizabeth Danilova, head of the Financial Stability Department of the Central Bank of Russia, commented during a press conference dedicated to the Russian Federation, separately for cryptocurrencies public consultation: currently there there are no negotiations on a ban on the possession of cryptocurrencies for citizens in Russia “, Islam Shazhaev, CEO of OneBoost, a digital asset management company, said in an email comment.
The implications if the Central Bank of Russia proposes a ban use Cryptocurrency Mining
ranks as the third largest cryptocurrency miner in the world, ahead of the US and Kazakhstan, especially after miners migrated from China under the country’s ban.
“Russia holds just over 10% of current bitcoin mining power. When and if the ban is finally enforced — which may still take some time — Russian miners could be forced to relocate their operations elsewhere,” said Anto Paroian, CEO of crypto hedge fund ARK36, in an email comment .
He stressed that the crypto market was not initially deterred by the news of the ban and major assets, including BTC, continued to post modest gains throughout the day.
“This suggests the development won’t rock markets in the same way China’s cryptocurrency ban did last year,” Paroian added.
However, according to Max Gokhman, Chief Investment Officer at AlphaTrAI, we sometimes see situations like this where crypto news feeds into price surprisingly slowly.
He told Bloomberg: “Perhaps some HODLers are hoping that this directive will not be signed into law, but in my opinion this will continue to push BTC lower towards the $30,000 it is likely to reach before the next cycle’s rally.”
In addition, Larisa Yarovaya, associate professor of finance at the University of Southampton, told the news outlet that Russian miners might find it difficult to move their companies to Kazakhstan given the current political situation.
Citing “people familiar with the matter,” Bloomberg says that unlike China, Russia’s ban would not apply to assets held by Russians abroad, while those with bank accounts abroad can trade cryptocurrencies.
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