In what appears to be a sudden move, the Russian Central Bank recommended a complete prohibition on cryptocurrency today. Up until now, mining and the purchase or sale of cryptocurrency have been in a gray zone, with sales of goods or services in return for cryptocurrency have been marked as illegal.
But according to Russia’s news portal Interfax, this recommendation calls for a ban of the following:
- Crypto cash exchanges. This is a part of the Russia cryptocurrency scene that has gained increasing international scrutiny, as described in this Bloomberg article entitled: “Ransomware HQ: Moscow’s Tallest Tower Is a Cybercriminal Cash Machine”
- Cryptocurrency mining. Mining has gained significant popularity in recent years, particularly in locations in Russia with cheap electricity rates. This law, if passed, would certainly not be popular among the many Russians who have invested heavily in mining equipment.
- Cryptocurrency Creation. It will be interesting to hear what Ethereum’s Russian-born founder, Vitalik Buterin, has to say about this ban.
- Cryptocurrency Purchase and Sale. This part is a bit confusing as it appears that “hodling” is not prohibited, but it is unclear of what could possibly be then done legally with any crypto.
So, why this sudden call for crypto-prohibition? According to the web-portal Smotrim.ru the logic of the proposed prohibition is as follows:
- Cryptocurrencies have similarities to financial pyramids. The price of “new money” depends on the speculative demand of new market players and can be manipulated by a small number of investors with the largest savings.
- Cryptocurrencies are popular among criminal gangs for laundering and withdrawing money.
- Cryptocurrencies threaten the economy – virtual coins, with an increase in their share in settlements, reduce investments in the real sector of the economy and increase capital outflow.
- Mining requires a lot of energy. Russia has become one of the largest mining centers. This increases the country’s emissions and carbon footprint, hinders the achievement of national goals, and increases the risk of emergencies.
Point 3 is perhaps the most curious of the 4, as there has been recent ruble volatility. This is not law yet, but it will be interesting to follow whether it does become law and then how closely a “crypto dry law” would be both followed and enforced.