Bank of Russia Blocks Mutual Funds From Offering Crypto Exposure

Bank of Russia Blocks Mutual Funds From Offering Crypto Exposure

Last updated on September 9th, 2022 at 10:03 am

The Bank of Russia has remained skeptical about cryptocurrencies.

The institution has now issued a statement regarding the investment opportunities available for mutual funds. According to Russia’s Central Bank, mutual funds have been banned from investing in digital assets such as Bitcoin.  

The Bank of Russia continues to take a strict stance regarding the crypto sector. The recent statement from the institution increased the number of assets that mutual funds can invest in.

However, it explicitly mentions that fund managers have been banned from buying cryptocurrencies and “financial instruments whose value depends on prices of digital assets.”

It further notes that mutual funds should not offer crypto exposure to professional or non-professional investors.

The recent statement is a follow-up from what the Bank of Russia recommended in July 2021. At the time, the institution urged mutual funds to refrain from including cryptocurrencies in their holdings.

The ban will not affect any mutual fund operating in Russia, given that none of them was offering crypto exposure. Mutual funds had stayed away from crypto despite the lack of a formal ban on the same.

Russia does not have a diversified offering of crypto-related products. The head of analytics at AMarkets brokerage firm, Artem Deev, noted that the Russian financial market only had one crypto-based exchange-traded fund (ETF).

Deev stated that the ETF was under the management of BrokerCreditService, a joint-stock management firm. The fund offers investors indirect exposure to the crypto space by investing in companies focused on blockchain technology. The fund has invested in companies such as Jack Dorsey’s Block.

Moreover, the largest bank in Russia, Sber, plans to launch an ETF focused on blockchain technology.

The fund will be named ‘Blockchain Economy’ and invest in companies that have invested in blockchain technology. Since the fund does not deal directly in cryptocurrencies, it does not fall under the restrictions of the Bank of Russia.

Crypto Regulations in Russia

This negative stance on the cryptocurrency space is not a first for the Bank of Russia. The bank has previously urged investors to refrain from engaging in digital assets because they bear a high amount of risk.

The harsh regulatory climate has not prevented Russia from being one of the largest crypto economies however. A recent report from Russia’s central bank revealed that Russians transacted around $5 Billion worth of cryptocurrencies annually.

The bank further noted that Russians were leading in site visits to Binance, the largest cryptocurrency exchange platform. The growing use of cryptocurrencies in the countries comes even as local banks were banned from dealing with crypto and have been urged to promote the country’s CBDC.

Besides trading, Russia is currently the third-largest Bitcoin mining hub after the USA and Kazakhstan, according to the Bitcoin network mining hashrate.

However, the current regulatory restrictions could stifle the rate of crypto adoption in Russia and the current trend could lead to the country declaring an outright ban on crypto.

Earlier this month, Russia’s president, Vladimir Putin, admitted to cryptocurrencies carrying a high level of risk.


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