Russia considers China-like ban on crypto mining and use

21 Jan 2022

Image: © Alexey Novikov/Stock.adobe.com

Following concerns around market bubbles and energy usage, Russia’s central bank has proposed a crackdown on cryptocurrencies.

Russia may ban crypto mining and investment amid fears that it could compromise financial stability in the country.

In a report published yesterday (20 January) and seen by Reuters, Russia’s central bank proposed a ban on the use and mining of crypto in the country as it has the potential to cause bubbles in the market.

Future Human

Under the proposals, financial institutions in Russia would be blocked from making any crypto transactions, including buying and selling of crypto for fiat currency.

Russia has long feared the prevalence of crypto could exacerbate criminal activity such as money laundering or the financing of terrorism. The new proposals would bring in a blanket ban, including crypto exchanges.

Binance, the world’s largest crypto exchange platform in trading volume, told Reuters it wants to enter into talks with the central bank of Russia to reconsider the proposals and protect the interest of Russian crypto owners.

The move mirrors China’s crackdown on crypto last year, when its government shut down bitcoin mining farms and ordered financial services firms to cease crypto activities, causing the value of bitcoin to plummet. Crypto trading has been illegal in China since 2019 but stricter rules were introduced in 2021.

Crypto mining and the energy crisis

After the Chinese crackdown, the US, Kazakhstan and Russia became the world’s largest hubs for cryptocurrency mining.

However, Russia’s central bank said it is weary of the vast amounts of energy required by the computers that mine cryptocurrencies. “The best solution is to introduce a ban on cryptocurrency mining in Russia,” it said.

The environmental impact of bitcoin and other cryptocurrencies has been a cause for concern due to the amount of power mining uses around the world. Kosovo’s government recently banned crypto mining to curb electricity consumption as it deals with a severe energy crisis.

Earlier this month, an internet shutdown in Kazakhstan had a large impact on the bitcoin mining industry and shed light on the cryptocurrency’s reliance on environmentally damaging fossil fuels like coal.

Bitcoin mining consumes around 91 terawatt-hours of electricity annually, which is more electricity than all of Finland, according to a New York Times analysis last year.

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Vish Gain is a journalist with Silicon Republic

editorial@siliconrepublic.com