---

The Bank of Russia has called for a complete ban on cryptocurrency.

In a report released Thursday, Russia's central bank stated that cryptocurrency must be banned.

During an online press conference with Elizaveta Danilova, director of the Bank of Russia's Financial Stability Department, the report "Cryptocurrencies: Trends, Risks, and Measures" was presented.

Cryptocurrencies, according to the research, are volatile and commonly employed in criminal activities such as fraud. According to the research, by providing a way for consumers to withdraw their money from the national economy, they risk undermining it and making the regulator's job of maintaining optimal monetary policies more difficult.

As a result, the bank claims that Russia requires new legislation and regulations to properly prohibit crypto-related operations. According to Danilova, the bank is not advocating that individual citizens be prohibited from owning cryptocurrency.

The use of the country's financial infrastructure for issuance and trade, which could jeopardise Russia's financial stability, should be prohibited. In November, the bank stated that Russians execute approximately $5 billion in cryptocurrency transactions every year, and that this level did not constitute a problem. The research recommends that the existing ban on using cryptocurrency for payments be strengthened, and that penalties be imposed on Russian individuals and enterprises who acquire or sell products, services, or labour.

No Russian financial institutions or infrastructure should be used for cryptocurrency transactions, and no Russian institutional investors should be allowed to invest in crypto assets. Mutual funds have previously been forbidden from investing in cryptocurrencies by the Bank of Russia. It is now proposing that sanctions be imposed for violating the ban.

Cryptocurrency mining, which has grown in popularity in Russia in recent years and even received some clearance from the country's parliament last year, was also criticised.

Mining generates new cryptocurrency supply, which boosts demand for other crypto services like exchanges. It also "creates a non-productive electricity expenditure, undermining the energy supply of residential buildings, social infrastructure, and industrial objects, as well as the Russian Federation's environmental agenda," according to the report.

The "optimal solution" would be to prohibit crypto mining in Russia, the regulator said in the report.

The stance, according to miners, was not unexpected. The report reaffirms the bank's current position, and the final policy will almost certainly include feedback from other parties.

The likelihood of a comprehensive prohibition of the bitcoin business is "negligible," according to Roman Zabuga, the PR director of mining hosting provider BitRiver.

Compass Mining CEO Whit Gibbs told CoinDesk, "This is the Russian central bank reaffirming their existing sentiment ahead of the next working group creation."

The cryptocurrency market seems to be unfazed as well. According to TradingView statistics, bitcoin was trading around $43,000 at the time of writing, up more than 3% since midnight UTC.

If the ban is imposed, it will spell the end for huge crypto enterprises, particularly mining farms, according to Sergey Mendeleev, executive director of a crypto investment portal InDeFi. "I'm confident it'll be more like the Chinese version," he said, "with no alternatives or loopholes."

"The repercussions will be disastrous not only for the [crypto] business, but for our future as well; it will be another step toward Russia falling further behind in technology than it already is," Mendeleev added. He predicted that the top technological specialists and entrepreneurs will leave Russia, along with a large portion of their investments.

The central bank intends to monitor cryptocurrency transactions by Russian citizens and coordinate with countries where cryptocurrency exchanges are established in order to obtain information on transactions by Russian users, the report says.

The regulator believes that improving current banking infrastructure and introducing the digital ruble, a central bank digital currency (CBDC) currently under development by the Bank of Russia, will meet Russians' demand for fast and low-cost digital payment options in the future, effectively giving them the benefits of crypto without crypto.

The Bank of Russia stated that the investment attractiveness of crypto assets might be replaced by digital assets, which will be issued in Russia under the law on digital assets, which has been in existence since summer 2020.

Financial market participants have until March 1 to comment on the report, according to the bank.

Binance, the world's largest cryptocurrency exchange by volume, has stated that it wants to strengthen its communication with the regulator.

"We always support dialogue on crypto and blockchain, and we hope that the advisory paper will kick off discussions between the Central Bank of Russia and cryptocurrency market participants," the company told CoinDesk through a press spokesman. "Through proactive steps and coordination with public and private sector stakeholders, Binance goes above and beyond industry standards to discover these problematic actors."