Russia proposes ban on cryptocurrency use and mining, will still allow citizens to own crypto

Russia's central bank has called for a blanket ban on cryptocurrencies in the country. The proposed ban prohibits cryptocurrency trading, mining as well as usage in the country. Once in effect, the law will only allow the owning of cryptocurrencies in Russia and no other related activities.

The Bank of Russia has shared the proposal in a new consultation paper. The paper highlights the risks posed by the volatile nature of cryptocurrencies to the financial stability and wellbeing of citizens of the country. The paper also points out the extensive use of cryptocurrencies in illegal activities.

The report by the central bank of Russia states that the rapid growth of cryptocurrencies is largely due to their speculative demand. This is leading to a potential bubble in the market and shares characteristics of a financial pyramid. If or when they lose their value, it could have a huge impact on the country's investors.

Russia had legally recognised cryptocurrencies back in 2020, though it banned their use for transactions soon after. The new proposal by the Bank of Russia aims to put more such restrictions around crypto in the country. A clear effect will likely also be observed on the crypto exchanges operating in Russia.

The paper also highlights the problem raised by cryptocurrency mining. Since mining of cryptocurrencies requires large computers with high computational power, their demand for energy takes a toll on the energy grid of a region. Many countries are addressing this issue now, and Russia's central bank seems to have taken a stance on it.

Russia ranks as the third-largest region for bitcoin mining in the world. With the corresponding energy demands causing an excess load on its energy sources, the Bank of Russia has stated that "the prohibition of cryptocurrency mining in Russia could be the best solution" to mitigate this issue.

Even with all these measures, the country has not outrightly banned cryptocurrencies, unlike China. Noting the stance of other countries on cryptocurrencies within the consultation paper, Russia does not envisage a ban on owning cryptocurrencies. The same was cleared by Elizaveta Danilova, head of the central bank's financial stability department.

In a report by Reuters, Danilova is mentioned as saying, "for now there are no plans to ban cryptocurrencies similar to the experience of China. The approach we have proposed will suffice