One month into 2022 and the debate on cryptocurrency is already heating up, with calls for regulation causing a rift between jurisdictions that are “crypto friendly” and those that aren’t. Which will determine the future of the market?
Russian Deputy Prime Minister Dmitry Chernyshenko has reportedly signed a roadmap to regulate crypto operations in Russia. The news comes after Russia’s central bank published a consultation paper that proposed a blanket ban on crypto-related activity in the country.
The paper, titled Cryptocurrencies: Trends, Risks, and Regulation, states “a wider adoption of cryptocurrencies creates significant risks for the Russian financial market”. It says non-state-based currencies pose a threat to citizens’ well-being, through loss of investments as a result of market volatility, scams and cyber attacks.
Jurisdictions have grappled with the idea decentralised digital currencies provide an alternative to sovereign currency – and thus pose a threat to central banks’ power over monetary policy.
Although Russia has stopped short of completely stifling operations inside its borders, the latest events follow a broader trend of nations struggling to embrace cryptocurrency. Future bans or regulations will determine the future of the industry.
Crypto ban or crypto friendly?
China has banned cryptocurrency trading multiple times. An outright ban on crypto mining last year was a massive loss to the industry, as most crypto mining happened in China.
Mining involves running software on computer servers to solve cryptographic algorithms. This process validates transactions and maintains a shared record of transactions across the blockchain network. People who participate, the “miners” are automatically rewarded in cryptocurrency.
Mining is an international industry, and large capital outlay goes towards the land, power and infrastructure needed to set up mining warehouses.
Read more: Why is Bitcoin's price at an all-time high? And how is its value determined?
The mining ban in China drove miners to sell or ship their equipment overseas and invest capital in friendlier jurisdictions, particularly the United States. One consequence was the strengthening of the network, as mining operations were diversified. As such, future bans may have less of an effect on the market.
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