The central bank of Russia is proposing the ban the countries citizens from using and mining cryptocurrency on Russian territory. This is due to the banks fears that it is a threat to the financial stability, citizens wellbeing and its monetary policy sovereignty.
The announcement means that Russia is the latest country to discuss their intentions to crackdown on digital currency as other governments like China and even the United States are beginning to worry that privately operated and highly volatile digital currencies could undermine their control of financial and monetary systems.
For many years the Russian Government has been critical of cryptocurrencies, as they argue that they can 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 recently published report from Thursday 20th January, the central bank outlined that 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 of Russia is proposing at plan that once introduced will prevent 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 has responded to the news by saying that it is 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.
Active cryptocurrency users in Russia reportedly have an annual transaction volume of about $5 billion US Dollars.
Russia is the world’s third-largest player in bitcoin mining, only behind the United States and Kazakhstan. However, the latter is likely to experience a miner exodus over fears of tightening regulation following unrest earlier this month.
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.
“The best solution is to introduce a ban on cryptocurrency mining in Russia,” outlined the Bank of Russia.
In August, Russia accounted for 11.2 per cent of the global “hashrate” — crypto jargon for the amount of computing power being used by computers connected to the bitcoin network.
In their report the Russian Bank mentioned other countries such as China who are trying to restrict cryptocurrency activity.
In September 2021, China intensified its crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.
Cryptocurrency Is Continuing to Become More Popular with Australians
A recently published survey showed that almost 1 in 10 Australians are currently investing in cryptocurrency. Despite crypto becoming a more common investment most people still view it as a very risky investment and its riskiness is one of the reasons why they are willing to invest.
Despite plenty of stories being told about early adopters making fortunes by trading cryptocurrency, most Australians buying into the digital currency say that it is just for a bit of fun.
Covid-related boredom might have also played a part, with 60 percent of Australians that trade cryptocurrency having started within the past 12 months.
Overall, trading crypto appears to be far more popular with young people than the older generations. On top of this males are three times more likely than females to already be invested in crypto.
According to the study, 19 percent of Gen Y are getting involved, compared to six percent of Gen X and just four percent of Baby Boomers have so far decided to invest in cryptocurrency.
Out of all the people surveyed, 60 percent said that they believe crypto is a “very risky” investment and 51 percent said there is a lack of transparency and regulatory accountability.
Others are taking the potential rewards more seriously, with 46 percent believing their investments hold long term growth opportunities and 32 percent have invested for short term returns.
Privacy of transactions 21 percent and trusting crypto over other financial assets 16 percent were also popular reasons for deciding to invest.
Furthermore, those of us who still don’t really understand what cryptocurrency is are far from alone even among people who have put their money in it.
Around 38 percent of cryptocurrency investors admitted to having little or no understanding of how cryptocurrency actually works.
“It is concerning that many investors do not fully understand what they are investing in and don’t have the appropriate risk profile to allow them to invest in such volatile markets. Cryptocurrency is very speculative, and people need to conduct their own research and seek advice before investing,” says Whitely Bradford, a financial literacy specialist at Griffith University.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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