Central Bank of Russia to restrict mutual funds from investing in crypto

  • The Russian Central Bank wants to prohibit mutual funds from dabbling in crypto and related financial products.
  • The move is among many others from the bank and other authorities aimed at protecting investors and minimizing financial risk.

Russia is moving in closer to reinforcing strict measures regarding cryptocurrencies in the country. The Central Bank of the Russian Federation (CBR) is now planning to prohibit mutual investment funds from placing money in digital assets. The upcoming laws will also apply to derivatives and securities whose prices are tied to crypto performances.

According to the monetary authority, these restrictions are aimed at protecting investors’ funds and rights. Both non-qualified and accredited investors in Russia will be obliged to abide by them. The new regulations will be reflected following an amendment of the 2016 CBR directive “On the composition and structure of assets of joint-stock investment funds and assets of mutual investment funds.” The bank has already published a draft document of the changes due to take place. These are now open for discussions and additional proposals until the deadline of Dec. 27.

Russia strict stance on cryptocurrencies

These regulations come after the CBR warned asset managers earlier this year against including cryptocurrencies in mutual funds. In July, the bank recommended that stock exchanges in Russia refrain from listing crypto-based instruments. Additionally, the regulator advised brokers and trustees to halt offerings of “pseudo-derivatives with such underlying assets to unqualified investors.”

Later, the bank added it would not play part in facilitating crypto and their related financial services to such investors. All these crypto-related constraints have been established based on financial risk reduction and consumer protection in the country.

In October, State Duma (lower house of the Russian parliament) lawmakers planned to devise restrictions on crypto purchases for private investors. The move was revealed by media stations quoiting Anatoly Aksakov, head of the important Financial Market Committee. Similar discussions have been held by other financial authorities in Russia’s capital, Moscow.

In the same month, the CBR published a draft directive limiting the number of digital assets non-qualified investors can purchase. The annual maximum would be 600,000 rubles (over $8,000), and it would be incorporated into the January law “On Digital Financial Assets.” Public opinion was sought on the same, but the rule never reached implementation.

Russians still heavily involved despite staunch laws

Nonetheless, a recent poll shows that alternative assets such as cryptocurrencies take up over 50 percent of the portfolios of non-qualified investors in Russia. 46 percent of the survey’s respondents said they consider crypto assets as an inflationary hedge. Moreover, a late November report by the CBR showed that the country had over $5 billion in annualized crypto transactions.

Read More: Annual crypto transactions in Russia top $5B despite govt hostility towards the industry

A Cambridge 2021 Bitcoin Electricity Consumption Index in August ranked Russia third worldwide in terms of Bitcoin hash rate. So even with the strict policies and warnings by administrators, Russians are still finding a way to cryptocurrencies. And with concerns of rising inflation, they might just double down.