Russian Central Bank proposes a blanket ban on crypto usage and mining

Russia’s central bank (CBR) proposed banning the use and mining of cryptocurrencies in Russia, citing threats to financial stability, citizens’ wellbeing, and its monetary policy sovereignty. The central bank’s hard line against crypto reportedly dovetails with the position of Russian security services.

In a report published on Thursday, the central bank said speculative demand primarily determined cryptocurrencies’ rapid growth and that they carried characteristics of a financial pyramid, warning of potential bubbles in the market, threatening financial stability and citizens, Reuters reported.

The bank proposed preventing financial institutions from carrying out any operations with cryptocurrencies, and said mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies for fiat currencies.

The proposed ban includes crypto exchanges. However, Binance, the world’s largest crypto exchange by volume, said it’s looking to improve communications with the regulator.

“We always welcome dialogue on crypto and blockchain, and we hope that the advisory report will initiate discussions between the Central Bank of Russia and representatives of the cryptocurrency market,” the company’s press representative told CoinDesk. “Binance goes above and beyond industry standards to detect these bad actors through proactive measures and collaboration with public and private sector stakeholders.”

Restrictions on owning cryptocurrency are not envisaged, said Elizaveta Danilova, head of the central bank’s financial stability department.

The bank reported that active cryptocurrency users in Russia have an annual transaction volume of about $5 billion.

Russia has argued for years against cryptocurrencies, saying they could be used in money laundering or to finance terrorism. It eventually gave them legal status in 2020 but banned their use as a means of payment, Reuters said.

The central bank’s hard line against crypto dovetails with the position of Russia’s powerful security services. As Bloomberg reported, the Federal Security Service (FSB) also lobbied Governor Elvira Nabiullina for a blanket ban as the hard-to-trace payments are increasingly used by Russians to donate to undesirable organizations, including media resources that have been labeled “foreign agents,” said anonymous sources in FSB, citing not public information.

“As for the FSB, the Bank of Russia has been saying for a long time that we consider the risks of cryptocurrencies to be high,” Danilova of the central bank said Thursday. “This is our position. But at the same time, we are pleased if other organs share it.”

Opposition and media funding accounts for an insignificant fraction of crypto use in Russia, but the security services are worried that it is a growing problem, they said.

The move is the latest in a global cryptocurrency crackdown as governments from Asia to the United States worry that privately operated and highly volatile digital currencies could undermine their control of financial and monetary systems.