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.