Reconsidering Financial Stability Amid US Sanctions Concerns
Russian Economic Ministries Also Voice Legalization Calls
[Asia Economy Reporter Hyunwoo Lee] The Central Bank of Russia has called for a complete ban on the use, trading, and mining of cryptocurrencies within the country as a measure to prevent capital outflow. This is interpreted as a strategy to enhance financial stability in preparation for comprehensive Western economic sanctions amid escalating military tensions with the United States over the Ukraine crisis.
According to Russian news agency TASS on the 20th (local time), the Central Bank of Russia proposed to the government in a report that the use, trading, and mining of cryptocurrencies be completely banned. At a press conference held via video conference on the same day, Elizaveta Danilova, head of the Financial Stability Department at the Central Bank of Russia, explained the reason for proposing the cryptocurrency ban, stating, "Cryptocurrencies are highly volatile, widely used for illegal activities, and provide an outlet for capital outflow, which worsens the national economy and makes it difficult to maintain monetary policy."
Since last year, Russia has banned cryptocurrency investments by the government and institutional investors but had not implemented regulations on the private sector. However, as the U.S. government warned it might impose dollar payment and import-export sanctions if Russia invades Ukraine, concerns over capital outflow and exchange rate stability have increased, leading the Central Bank to move toward active private-sector cryptocurrency regulation.
However, there are many disagreements within the Russian government, so it remains uncertain whether a full-scale private-sector cryptocurrency regulation will actually begin. According to the BBC, last November, the Russian Ministry of Economic Development and the Ministry of Energy proposed legalizing cryptocurrencies to the government, but the plan was scrapped due to opposition from the Central Bank. The economic ministries reportedly suggested legalizing cryptocurrency trading and introducing new taxes to increase fiscal revenue.
This is because cryptocurrency trading and mining are actively conducted within Russia. According to the Central Bank of Russia, over $5 billion (approximately 5.95 trillion KRW) worth of cryptocurrencies are currently traded annually in Russia. Additionally, since the second half of last year, Bitcoin mining has been actively carried out in Russia due to the Chinese government's regulations on cryptocurrency exchanges. According to cryptocurrency media CoinDesk, Russia accounts for 11.9% of global Bitcoin mining, ranking as the world's third-largest mining country after the United States (35.4%) and Kazakhstan (18.1%).
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