Central Bank of the Russian Federation announces that it will support proposals to ban all bitcoin payments in the country. This regime has made the country to revert into a crypto-hostile territory.
The move comes unexpectedly as the country participated for weeks, in the pro-cryptocurrency talk with Moscow’s technology leaders and apparent approval of digital assets from the Kremlin.
The news also comes as a direct contradiction of the recent adoption of cryptocurrency in Germany. Germany has now approved new legislation to allow banks to sell and store Bitcoin and other cryptocurrencies.
Bitcoin Rejection Fueled By Volatility and Cybercrime
The Chairman of the Central Bank of the Russian Federation Elvira Nabiullina explained their decision to the Russian state-operated domestic news agency (RIA). She said that their decision was driven by concerns about cryptocurrency market volatility and cybercrime and that the only legal tender in the Russian Federation is the Ruble.
She added the Federation would continue to consider risks carried by cryptocurrencies as significant:
“…including in the field of money laundering of proceeds from crime and financing of terrorism as well as in conducting exchange transactions due to sharp exchange rate fluctuations.”
Bitcoin suffered a drastic price crash in November with high volatility linked criminal activity since September, which also influenced the decision by Russian Authorities as well as its relationship to online casinos gambling. Nabiullina added:
“In our opinion, private cryptocurrencies cannot be equated with fiat money, and cannot be legal tender. It is decided to ban cryptocurrencies as a means of payment at the legislative level. We consider it appropriate to support this decision.”
Russians Contradict Their Recent Plans for Cryptocurrency
Russian Authorities have been in recent weeks discussing the country’s projects to usher at the new future in digital finance in the country. The Russian president Vladimir Putin was also understood to be backing crypto Ruble plans while the Kremlin claimed to be funding a project to mine the remaining Bitcoin supply.
The Russian News Agency reported that Putin called for the acceleration of the development of the digital economy within the Eurasian Economic Union (EAEU) during the 2018 address to the EU leaders:
“We assume it is necessary to accelerate the implementation of the whole ‘digital agenda’ of the Union and to coordinate efforts on the development of ‘Internet economy,’ creation of general digital trade rules, equal standards of exchange, and protection of information.”
As reported by the Moscow Times last month, Russia metal plant that was closed due to the US sanctions was being transformed into a hub for mining bitcoin. The Russian Mining Company (RCW) leased part of the plant to ramp up bitcoin mining across Russia. The president of the Russian Association of Cryptoeconomics and Blockchain (RACIB) Yuri Pripachkin, stated that mining is still beneficial to mining participants:
“There are already a lot of players in the world who are mining this cryptocurrency. For the Russian pool, it is realistic to focus on 5-7% of the total volume, and the indicator very much depends on access to the corresponding electricity prices.”
The ban also comes a year barely after the Ministry Of Finance allowed the sale and purchase of cryptocurrencies in the Russian Federation in January 2018. The Deputy Finance Minister, Alexei Moiseev, stated:
“As part of the preparation of the bill on the circulation of cryptocurrencies in the Russian Federation, the idea of allowing the sale and purchase, but not the calculations, is being discussed, a final decision on this issue has not yet been made.”