The central bank of Russia proposed a ban on issuing and using cryptocurrencies last week, citing the fact that the digital assets could potentially undermine Moscow's financial system and undermine the country's monetary policy.
Crypto mining is a process of solving a complex set of algorithms and is a threat to the country's energy supply and the country's attempt to move towards cleaner energy sources. Russia is one of the top five countries for mining cryptocurrencies, accounting for nearly 7% of the Bitcoins mining power, according to data from the Cambridge Centre for Alternative Finance. The cost of mining Bitcoins alone goes up about half as much annual electricity as the whole of the United Kingdom.
Pavel Durov, CEO and co-founder of Telegram messaging app, wrote on Saturday in his Telegram channel that the Bank of Russia suggests that a total ban on cryptocurrencies is throwing the baby out of the water. None of the developed nations are banning cryptocurrencies. Durov claimed that the ban would hinder the country's development ofBlockchain technology, preventing the IT sector in Russia from reaching its potential and likely driving an exodus of talent outward to better pastures.
Russians with overseas virtual assets would not be able to trade cryptocurrencies, and the proposed legislation would not be applicable to overseas virtual assets, according to the head of the central bank, Elizaveta Danilova.
The decision by Russia's central bank to compare cryptocurrencies to pyramid schemes underscores the negative outlook on digital currencies and its belief thatcryptocurrencies could potentially jeopardize Russia's monetary sovereignty.