Tag: russia central bank

Russia’s Central Bank Orders Local Stock Exchanges to Avoid Listing Crypto-Related Funds

The Bank of Russia published a notice and explanatory letter on Thursday, July 22, instructing stock exchanges in the country not to list investment products related to crypto prices.

According to the recommendation letter, the central bank ordered stock exchange operators not to list securities like exchange-traded funds, which offer payments based on the prices of crypto assets, securities issued by cryptocurrency-related funds, digital assets issued abroad, and crypto price indexes.

The regulator also does not want any listing for crypto derivatives and securities of crypto funds. Furthermore, the central bank ordered mutual fund managers not to include firms offering crypto services in their managed portfolios and advised trustees and brokers to avoid providing such securities to non-qualified investors.

The regulator endorsed the recommendation to prevent retail investors from getting access to products they don’t understand. The Bank of Russia stated in its statement:

“Cryptocurrencies and digital assets are characterised by high volatility, low transparency of pricing mechanisms, low liquidity, technological, regulatory and other specific risks. Purchase of investment products tied to them exposes people who lack experience and professional knowledge to a high risk of losing money,” 

The recommendations only apply to retail investors as accredited, and professional investors are still allowed to invest in crypto-related company stocks.

However, the regulator stated that the ban does not apply to central bank digital currencies (CBDC) or digital assets issued, according to the Russian Law in information systems whose operators are registered with the Bank of Russia.

Tough Stance on Crypto

The regulatory recommendation comes when many crypto firms move to major stock exchanges in Asia, Europe, and the US for a public listing of their stocks.

However, the Bank of Russia has been reluctant to allow the entrance of crypto companies into the mainstream financial sector.

Crypto assets were illegal in Russia until last year when the central bank gave such digital assets legal status but banned them from being used in payments. The regulator maintains that the Russian ruble is the only legal tender that citizens can use for financial transactions and payments.

The central bank considers digital currencies as the future of the financial system, saying that there is a need for cheap and fast payment systems, and Central Bank Digital Currencies can fill the gap.

The regulator maintains that CBDCs are not the same as crypto-assets like Bitcoin. According to the regulator, CBDCs are issued and controlled by authorities, and their values are pegged to a traditional currency like the US dollar.

In September 2020, the Bank of Russia introduced more regulations to prohibit Russian public officials from owning cryptocurrencies and compelling election candidates to report their crypto holdings.

October 2020, the central bank submitted a proposal to limit the amount of digital assets that non-professional investors can purchase in a year.

Russian Banks Seeks Help from China's UnionPay amid Crackdown from Mastercard & Visa

Following the service cut from American payment giants Mastercard and Visa, the Central Bank of Russia (CBR) has informed its citizens that credit and debit cards issued by these service providers will stop functioning overseas from March 9. 

In a bid to mitigate the strain on the users of these payment service providers, the Central Bank said some of its indigenous financial institutions are looking at integrating UnionPay, a Chinese-based payment services provider, as an alternative to Mastercard and Visa.

In reality, many fintech and payment firms have joined Mastercard and Visa in banning Russian users, a move many deem necessary as a form of compliance to the sanctions from Western governments on Russia for its role in the ongoing war on Ukrainian soil. The cards will still work for users still resident in Russia until their expiry dates.

While many Russian nationals have been stranded with the inability to make use of the cards abroad, the proactive move with UnionPay will help ease off further isolation and the ability to make digital payments. 

The Central Bank is confident the UnionPay system with its accessibility in about 180 countries, will equally serve Russians as best as Mastercard and Visa. While several Russian financial institutions already make use of UnionPay, others, including Sberbank and Tinkoff, could start issuing cards co-badging RussRussia’sestic Mir payments system with UnionPay as soon as possible.

While Russia’s economic and financial isolation is already broad-faced, many digital currency exchanges do not align with the strategy to impose extra hardship on Russians by cutting them off their abilities to use digital currencies. 

One of these trading platforms is Coinbase Global Inc, with CEO Brian Armstrong saying trailing the path to sever ties with Russian users will cause more hardship for the masses, most of whom do not approve of President Vladimir PutiPutin’sm disposition.

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