Key takeaways:
- Alexander Navalny’s chief of staff, Leonid Volkov, is opposed to the crypto ban and thinks it is virtually impossible to enforce it properly
- Telegram CEO fears the ban would have a devastating effect on the Russian IT sector and would destroy legal projects in the sector
- In August, Russia accounted for 11.2% of the global Bitcoin hashrate, trailing only the US and Kazakhstan
Prominent tech and political executives have come out in opposition to Russia’s central bank’s recently proposed cryptocurrency ban, which would outlaw all cryptocurrency-related activities in the country apart from individual crypto ownership.
Leonid Volkov says Moscow wants a crypto ban to restrict the financing of political opposition
Leonid Volkov, Alexander Navalny’s chief of staff, made a post on Telegram on Thursday, calling the proposed cryptocurrency ban a form of stifling political opposition. Volkov wrote about Russia’s Federal Security Service (FSB) being instrumental in advancing the crypto ban, which was a reference to an earlier report by Bloomberg that claimed the ban on digital currency could restrict fundraising capabilities of “non-systemic opposition” in the country.
Navalny is the founder of The Anti-Corruption Foundation (BFK), arguably the most prominent opposition leader in Russia and one of the loudest critics of the current Russian president Vladimir Putin. Navalny was poisoned with a nerve agent in the summer of 2020. After completing his recovery in Germany, Navalny returned to Russia and was sentenced to 3 and a half years in a penal colony. Navalny said that the ruling was politically motivated and used “as a means to intimidate millions of people.”
Volkov wrote that banning crypto is virtually impossible and likened it to banning person-to-person money transfers:
“Yes, they can make it very difficult to deposit funds on crypto exchanges, which means that intermediary services will simply appear that will do this through foreign jurisdictions. Yes, transaction costs will rise. Well, that’s all, I guess.”
Telegram CEO fears the ban would “put an end” to legal Russian crypto projects
Pavel Durov, the CEO of Telegram, shares Volkov’s sentiment. On Thursday, he wrote that the proposed ban would have devastating consequences for the Russian “high-tech economy,” and would drive out IT professionals. Volkov added that if the ban were enforced, it would “inevitably slow down the development of blockchain technologies in general.”
Durov wrote that the regulation and oversight over the circulation of digital currencies is “natural,” he fears that such a ban would not stop malicious actors, but “it will put an end to legal Russian projects in this area.”
If the proposed ban passes, it would spell disaster for the Bitcoin network, at least in the short term. According to Cambridge Bitcoin Electricity Consumption Index (CBECI), Russia accounted for the third-largest share of the global Bitcoin hashrate with 11.2% as of August 2021.
The news of the Russian ban on crypto coincided with the massive drop in the prices of digital assets, that began last Friday. Bitcoin lost nearly 25% in the four days since the ban was initially proposed, while the total crypto market cap shrunk to levels not seen since last August.
