Cryptocurrency has been transforming the economies of all the countries for a few years now. Various developed countries have considered the importance and effects of cryptocurrency site, Russia being one of them. Russia is a very strong economy of the world, and it has taken steps in the cryptocurrency world as well.
Not long ago, Russia had signed a law for cryptocurrencies. Though it imposed strict restrictions on the use of cryptocurrency as a form of monetary currency, it didn’t ban it. It followed a regulation that placed activities related to cryptocurrencies under anti-money laundering regulations.
Cryptocurrencies were allowed in Russia, though not for exchanging goods or services from January last year. But this year, the central bank of Russia has banned the mining and use of cryptocurrencies in the country. The reasons that it stated for this ban were dangers to the financial stability, the wellbeing of citizens, and the supremacy of its monetary policy.
When all the countries were worrying about the dangers to their economy because of this unpredictable currency, Russia was quick to take action. Russia, nevertheless, had been debating against cryptocurrency for a long time. Their reasons were quite valid that they can be used in financing terrorism and money laundering.
The central bank of Russia has stated that the conjectural demand for cryptocurrencies was primarily determined by their rapid growth. According to them, cryptocurrencies carry features of a financial pyramid, deterring complications in the market and posing a danger to financial stability and citizens.
The central bank of Russia has also suggested that the financial entities should be prevented from carrying out any transactions in cryptocurrencies. They are also planning to develop mechanisms to stop or block transactions that involve dealing in cryptocurrencies.
The enforced ban also includes cryptocurrency exchanges. Nevertheless, restrictions on possessing cryptocurrency are not predicted yet. The bank has also stated that it would coordinate with regulators in countries where cryptocurrency exchanges exist to fetch information about the transactions of Russian clients.
It has also given the example of China, which is also executing a ban. China had also intensified its clampdown on cryptocurrencies while banning mining and transactions of cryptocurrencies.
Russia, next only to the United States and Kazakhstan, is the third-largest country in the cryptocurrency game in the world. But according to the central bank of Russia, it created issues for energy consumption. As we all know, cryptocurrencies are mined by solving complicated mathematical problems which consume a lot of energy. The process gulps a lot of electricity and is powered by precious fossil fuels.
Last year, Russia accounted for more than 11 per cent of the global hash rate. Hashrate is the slang word in the cryptocurrency language referring to the amount of power used by the computers in the cryptocurrency network. The central bank of Russia stated that the best possible solution to this situation was the enforcement of a ban.
Like the Reserve Bank of India, the central bank of Russia is also planning to launch a digital currency powered by it. Since cryptocurrency assets are becoming very popular and are posing a threat to the supremacy of monetary policy, it was much-needed.
Indeed, the central bank of Russia has been a significant opponent of the development of cryptocurrencies in Russia for a long time. It had issued a letter deterrent to crimes concerning cryptocurrencies in 2017. In 2014, it also alerted the country about the use of cryptocurrencies in money laundering activities and funding terrorism. It finally came out and stated that trading in cryptocurrencies is similar to gambling and cannot be considered an actual source of investment. It also said that the government should not encourage the citizens to invest or trade in cryptocurrencies.
Russia has undoubtedly placed its stand clearly about cryptocurrencies. The various reasons cited by the central bank of Russia are very much valid, and hence the step might help elevate its economy. A year back, people were not expecting Russia to take this step, but it took it and is also taking steps to enforce this ban strictly. It is clear now that Russia would now probably launch a digital currency powered by the central bank.