Russia's central bank on Thursday proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens' well-being and the sovereignty of its monetary policy.

Russians are active cryptocurrency users, with an annual trading volume of around $5 billion. Russia is the world's third largest player in bitcoin mining, behind the United States and Kazakhstan. In a report on Thursday, the central bank said speculative demand mainly drives the rapid growth of cryptocurrencies and exhibits the characteristics of a financial pyramid, warning against the formation of bubbles in the market, which would threaten the financial stability and citizens.

The bank proposed to block financial institutions from transacting with cryptocurrencies and said mechanisms should be developed to block transactions to buy or sell cryptocurrencies for fiat, or traditional currencies. The proposed ban includes cryptocurrency exchanges.