Cryptocurrencies Steal Money from the Economy; Bank of Russia Defends its Negative Stance on the Industry

On January 20, the Bank of Russia published a report proposing to ban the cryptocurrency industry in the country. After being heavily criticized, the institution defended its position in a statement.

Speaking to Forbes Russia, the bank’s representative argued that cryptocurrencies can potentially harm the country’s economy. Literally, they steal money from the economy, as citizens use them for storing value instead of deposits, stocks and bonds. Deposits, stocks, and bonds, in turn, boost the economy, so it suffers when people turn to alternatives. 

Moreover, by choosing cryptocurrencies, people are fueling an industry that is potentially criminal. Digital assets are widely used for illegal transactions, money laundering, terrorist financing, etc. 

Lack of support 

As CoinIdol, a world blockchain news outlet, previously reported, the report sparked concern in the Russian crypto community. One anonymous enthusiast even threatened to blow up the bank’s building, citing its hostility towards cryptocurrencies as the reason. And shortly after the report was published, an anonymous investor withdrew over 6 million rubles ($83 million) in USDT stablecoin from one’s Binance wallet. 

Nevertheless, the government has so far shown no support for this stance. On January 25, the head of the Finance Ministry’s Financial Policy Department, Ivan Chebeskov, stated that it would make more sense to regulate the industry, but not ban it. A blanket ban can potentially do much more damage to the economy. In particular, it affects the mining of cryptocurrencies. 

According to the Russian Cryptoeconomy, Artificial Intelligence and Blockchain Association (RACIB), 11.23% of Bitcoin mining capacity and 14% of Ethereum mining capacity are currently located in Russia. The average daily income of miners is $52 million and $46.85 million respectively. Therefore, it would be reasonable to impose a minimum tax of 6% on miners. This would inject much more funds into the Russian economy than a blanket ban. 

Most community stakeholders share the opinion that banning the cryptocurrency industry is very unreasonable due to the significant negative consequences. For example, the founder of Telegram, Pavel Durov, argued that a ban would not stop illegal players, but would completely destroy numerous legal industries such as blockchain development, resulting in a massive drain of the country’s IT potential.