Russia is home to a thriving industry for the production of Bitcoins and others crypto coins.
(Photo: Bloomberg)
Cryptocurrencies bear all the hallmarks of a Ponzi scheme, undermine monetary policy and pose a risk to Russia’s financial system, the central bank said in a report published on Thursday. “Potential risks to financial stability associated with cryptocurrencies are much higher for emerging markets,” the central bank writes in the report.
The Central Bank of Russia had long seen cryptocurrencies as a risk to financial stability and a way to fund criminal activity, and hinted at tough rules. As recently as December, Central Bank Governor Elvira Nabiullina said Russia’s infrastructure should not be used for cryptocurrency trading.
The central bank’s report also spoke out against the creation of crypto assets, so-called mining, which requires large amounts of computing power and therefore electricity. This harms Russia’s green agenda and endangers the energy supply, it says.
Russia is home to a thriving crypto mining industry, the third largest in the world according to a study by Cambridge University. This has grown in importance since China has outlawed crypto-related transactions and banned crypto coin mining.
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Domestic intelligence has campaigned for the ban
The Russian advance also comes against the background of the rigorous crackdown on the political opposition and independent media in the country since the arrest of Alexei Navalny a year ago.
The central bank’s anti-crypto stance aligns with that of Russia’s domestic intelligence service, which according to people familiar with the matter, recently campaigned hard for the ban with central bank governor Nabiullina.
The successor organization to the KGB, known as the FSB (Federal Service for Security), appears concerned that the hard-to-trace payments could increasingly be used to donate to organizations deemed undesirable by the government or to media outlets deemed “foreign agents”. according to people familiar with the matter. Russia has already fined foreign tech companies heavily for failing to remove certain content.
Funding for the opposition and the media accounts for only an insignificant part of the more than seven trillion rubles ($99 billion) held in roughly 17 million Russian crypto wallets, the people said. Nevertheless, the secret service fears that the problem will increase.
Navalny’s network, which was banned as “extremist” by Russian authorities last year, continues to accept donations in Bitcoin. A crypto wallet listed on its website has received $4 million worth of payments over the past five years, according to Blockchair.
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