Crypto derivatives now accessible for experienced investors, according to Bank of Russia.
Bank of Russia Allows Crypto-Linked Instruments for Qualified Investors
In a significant development, the Bank of Russia has announced that financial institutions can offer derivatives linked to cryptocurrency prices to qualified investors, marking a cautious yet monumental step towards regulated crypto exposure in the country.
The financial derivative products, which include securities and digital financial assets, will not result in actual ownership of cryptocurrencies like Bitcoin or Ethereum, aligning with the restrictions faced by U.S.-based crypto ETFs in terms of offering in-kind redemptions.
Financial institutions have been urged to approach these offerings conservatively, with full capital coverage and individual exposure limits, while reiterating the longstanding warning against direct investment in cryptocurrencies.
This latest policy shift is part of a series of measures aimed at developing Russia's domestic crypto infrastructure without compromising its control. In 2020, the Bank of Russia barred mutual funds and brokers from offering crypto-exposed products due to concerns over volatility, fraud risks, and systemic threats.
Historically, the regulator has viewed cryptocurrencies as incompatible with national monetary policy. However, the situation began to change following Russia's invasion of Ukraine in 2022, which triggered international sanctions. Isolated from global finance, Russian officials began exploring the potential of cryptocurrencies for international settlements and preserving liquidity.
Last August, Putin signed a law permitting registered crypto miners to operate, formally regulating an industry that had long been kept in legal limbo. In March, the Bank of Russia floated a proposal to allow "particularly qualified" investors to participate in a limited three-year crypto trial. By April, plans for a state-backed crypto exchange were in the works, with access limited to "super-qualified" investors.
While details regarding a proposed state-backed crypto exchange are currently unavailable, Sberbank, one of Russia's largest banks, is preparing to serve as a market maker and liquidity provider for regulated crypto platforms, potentially facilitating more direct trading for super-qualified investors.
The Bank of Russia plans to formalize rules to better manage risks associated with cryptocurrency volatility over the coming year, indicating an ongoing effort to monitor and manage the integration of crypto-related products within the Russian financial sector.
The recent policy change represents Russia's evolving approach to cryptocurrencies, allowing for the trading of crypto-linked derivatives but not direct ownership of cryptocurrencies by most investors. The focus is on qualified investors with significant financial resources, and there are strict risk management measures in place. While there is no clear update on a state-backed crypto exchange, Sberbank's involvement in local crypto platforms indicates a potential for further integration of cryptocurrencies into Russia's financial system.
- The Bank of Russia's latest announcement allows financial institutions to offer derivatives linked to cryptocurrency prices, such as Bitcoin and Ethereum, to qualified investors.
- These financial derivative products are securities and digital financial assets that do not result in actual ownership of cryptocurrencies.
- Financial institutions are urged to approach these offerings conservatively, with full capital coverage and individual exposure limits.
- The Bank of Russia's policy shift is part of efforts to develop Russia's domestic crypto infrastructure without compromising its control.
- In 2020, the Bank of Russia barred mutual funds and brokers from offering crypto-exposed products due to concerns over volatility, fraud risks, and systemic threats.
- Last August, Putin signed a law permitting registered crypto miners to operate, and the Bank of Russia has proposed a limited three-year crypto trial for particularly qualified investors.
- Sberbank, one of Russia's largest banks, is preparing to serve as a market maker and liquidity provider for regulated crypto platforms, indicating potential direct trading opportunities for super-qualified investors.
