Russia initiates ban on use and mining of cryptocurrencies

Russia's central bank has proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens' wellbeing and its monetary policy sovereignty.

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.

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.

In a report 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. 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. Cryptocurrency exchange Binance told Reuters it was committed to working with regulators and hoped the report's release would spawn dialogue with the central bank on protecting the interests of Russian crypto users.

The central bank said it would work with regulators in countries where crypto exchanges are registered to collect information about the operations of Russian clients. It pointed to steps taken in other countries, such as China, to curb cryptocurrency activity.

The Bank of Russia said crypto mining created problems for energy consumption. Bitcoin and other cryptocurrencies are "mined" by powerful computers that compete against others hooked up to a global network to solve complex mathematical puzzles. The process guzzles electricity and is often powered by fossil fuels.