Hungary’s Central Bank calls for Ban on Bitcoin Mining and Trading

【TL;DR】

Budapest: The governor of Hungary's Central Bank, György Matolcsy, has called for an outright ban on bitcoin mining and trading in the European Union. He made this call in response to Russia's proposed cryptocurrency mining and trading ban.


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In a press release by the Magyar Nemzeti Bank governor, he stated that "cryptocurrencies could service illegal activities and tend to build financial pyramids." He also said, "The EU should act together to preempt the building up of new financial pyramids and financial bubbles. EU citizens and companies would be allowed to own cryptocurrencies abroad, and regulators will track their holdings." Read the full press release here.

György Matolcsy joins the growing list of government figures opposed to bitcoin's recent dominance worldwide. In China, the government placed a blanket ban on all cryptocurrency activities. Eric Thedeen, the Vice-Chairman of the European Securities and Markets Authority (ESMA), also called for a ban on bitcoin mining from proof-of-work in January. The timeline of events worldwide shows that cryptocurrencies are controversial, mainly due to their unregulated nature. However, as regulators cast aspersions on bitcoin and other cryptocurrencies, recent events show that they are a concept that has come to stay.

Russia Makes U-Turn on Cryptocurrency Ban

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According to Reuters, the Russian central bank proposed a blanket ban on cryptocurrencies in their country. The bank cited threats to the financial stability and wellbeing of their citizens as the reason. The bank also claims cryptocurrencies violate their sovereign status as the monetary policy authority. However, less than a month from making this declaration, the Russian government has made a U-turn and decided not to ban cryptocurrencies instead, regulating them.

According to Russian Finance Minister Anton Siluanov, the Finance Ministry had taken a different stance on the issue and was against the outright ban of cryptocurrency in Russia. The back and forth between the Russian finance ministry and the Central Bank on the subject of cryptocurrency has lasted for over 18 months leading to the intervention of the President, Vladimir Putin. The president has asked both parties to reach a consensus on the issue.

Russia is one of the European nations with a high volume of crypto transactions, with transactions totaling over $5 billion. Since 2020, digital currencies have been a topic of debate in Russia. The central bank has raised concern over the ability of cryptocurrency to undermine monetary policy in the country. Issues have also been raised about the proof-of-work method used in mining cryptocurrency, which is very energy-intensive. Despite layers of arguments against digital currencies, the country confirmed the legal status of cryptocurrencies in 2020. However, they cannot be a means of payment.

However, in January 2022, the Central Bank pushed again for the outright ban on cryptocurrencies. According to Coindesk, the Central Bank had kicked off creating a CBDC (Central Bank Digital Currency). After more debates, the country decided against outrightly banning cryptocurrencies. We should expect a set of new laws governing cryptocurrencies. According to Business Insider, the government has decided to treat cryptocurrencies as foreign currency rather than "financial assets." Still, in line with the provision of the 2021 law, cryptocurrencies will not be allowed as a means of payment in Russia.

Hungary and Russia have not been the first countries to clamor for a ban on bitcoin mining and trading. The prohibitions and restrictions on digital currencies have been a rising trend worldwide. China, Turkey, North Macedonia, Egypt, Nigeria, Vietnam, Iran, Indonesia, among others, have all placed some form of restrictions on cryptocurrencies in their countries.

Calls for bitcoin Mining Ban in EU

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In his calls for a ban on cryptocurrency activities in the EU, Governor Matolcsy of the MNB reiterated the sentiments of Eric Thedeen. He earlier this year called for a ban on proof-of-work mining of bitcoin in the EU. In an interview with Financial Times, Thedeen stated that the energy-intensive nature of the method would pose a challenge for EU countries to meet the goals of the Paris agreement. Thedeen, a Swedish national, made the call in solidarity with concerns from some of the Swedish regulators. According to observers and regulators, bitcoin mining is compounding the energy crisis in the EU as cheap renewable energy is used to mine bitcoin rather than public use. However, crypto advocates in the EU have pushed back on the calls to ban proof-of-work mining stating that the hash rate from the EU is still meager compared to other parts of the world. According to Dmitrijs Atkins, the European Crypto Mining Association founder, crypto mining is almost dead in the EU.


Since the ban on bitcoin mining in China, miners have been worldwide to carry out the activities. The US has picked up the baton in bitcoin mining, followed by Kazakhstan and Russia. Experts opine that the authorities in the EU have refused to combat the root cause of the increased electricity bill in the EU but have shifted blame to cryptocurrency mining.



Author: Gate.io Observer: M. Olatunji
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