Hi Apolloniya,
This is a great topic!
In my opinion, banning cryptocurrencies is not the right solution. As you identified, this could lead to creating an underground crypto market (maybe on the dark web?). It would be difficult to tax crypto-transactions in such a case, and even worse, it would increase cybersecurity risks. However, we have seen authoritarian states like China take this approach in the past. So I wonder whether Russia’s ban proposal is really driven by environmental concerns and their plans to decarbonise the Russian economy or by the sovereignty concerns that decentralised finance poses to the state.
As you mentioned, Russia will need to spend a lot of money and resources on prosecuting miners. I don’t think this is a priority for most countries right now, given that there are other more fundamental concerns affecting the economy (such as supply chain issues and struggles in the employment market, energy shortages, ect.). Considering this, it appears to me that other countries will be adopting a more lenient approach, especially those with strong liberal ideals.
I genuinely do not think that the G7 countries (for example) would act like El Salvador and make cryptocurrencies a legal tender. That would be outrageous considering the lack of regulation and deep understanding around these assets! But we have seen Spain, Italy and the UK trying to regulate crypto adverts in an attempt to control this space and raise awareness. In my opinion, this is a good starting point, but countries have to create an effective legal framework to make a real difference.
I think this is such a complex area that getting to fully understand what is really going on in the crypto world is taking governments a bit of time. This is also one of the reasons I think banning crypto won’t work. This market is growing so fast that I won’t be surprised if the crypto experts find a way to divert their energy source to be untraceable, or even develop a way of consuming less energy not to bring attention.
Also, suppose that governments decide to ban cryptocurrencies as China did. This could pose a real risk for the likes of Bitcoin because demand for cryptocurrencies that aren’t backed by central banks would decrease. But adopting central banks’ cryptocurrency would contradict the decentralised finance movement. I would think that people that really believe in decentralised finance would continue to support the likes of Bitcoin and Ethereum but underground, mainly because the adoption of NFTs by the likes of Meta and Twitter could give this community a platform to hold and continue to mobilise their cryptocurrencies when trading NFTs (which at the moment rely on the Ethereum network). People can always find their way around it, and providing effective regulations would deter criminal behaviours and allow authorities to keep an eye on this market.
On the other hand, if countries don’t hurry up and create an adequate legal framework soon, we could expect to see more people gambling with cryptocurrencies like it is happening in Turkey at the moment. This can further destabilise economies worldwide, especially in the most vulnerable sectors of society.
