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The Central Bank of Russia said in a recent report released on Thursday that crypto mining, crypto trading and usage will be considered illegal, though owning will be allowed. The regulator said that they are awaiting comments suggestions till the 1st of March and will make changes if deemed necessary.
Titled "Cryptocurrencies: trends, risks, measures", the report states that the regulations and rules surrounding crypto have to be solidified given its most volatile nature and its vulnerability to illegal activities like fraud, embezzlement etc. Elizaveta Danilova, director of the Bank of Russia, Financial Stability Department, announced this via an online press conference on Thursday.
The main reason for imposing these new laws and regulations on cryptocurrency is that the country's financial structure is being threatened, the CBR says. This allows people to take money out of the economy, which will undermine the effectiveness of the national currency and the regulator's work of maintaining optimal monetary policies becomes harder. Last year, in November, the Russian government saw that the annual crypto transactions had amounted to $5 billion.
New laws are that the general public shouldn't use crypto for payments, institutional investors are not allowed to invest in crypto-assets, and no Russian financial organization can cryptocurrency transactions. The Bank of Russia has barred mutual funds from investing in cryptocurrencies. The bank has also pushed for seeking penalties or legal liability for violations of the ban.
After China brought out its no-crypto move, Russia became the prime Hotspot for crypto mining. Though it garnered approval from the parliament, it is now under scrutiny. Mining cryptocurrency means the fresh supply of coins to the general public, which will simulate demand for cryptocurrencies and, furthermore, damage the financial infrastructure of the nation. Hence, the optimal solution would be to ban all crypto mines. However, many are contemplating that the Russian bank is just reiterating its old statement ahead of the upcoming working group formation.
However, there were no problems in the crypto market. BTC was selling at $43000 at the time of publication of the report, and by the end of the day, it even ranked 3% more in the market. But, if this ban is implemented, many large scale crypto businesses will be shut down.
Sergey Mendeleev, the executive director of a crypto investment platform, InDeFi, says, "I'm sure it will be more like the Chinese variant, with no loopholes or options." He went on to suggest that this move can be bad for Russia as technological developments and how this can affect Russia from being a part of many crypto investments in the future.
The government is planning to monitor people's transactions and coordinate with other jurisdictions to better understand the flow of money and for the cryptocurrency exchanges to get rightly registered for information.