No Crypto for You, Bank of Russia Tells Mutual Funds

The Bank of Russia has released new regulations that bar Russian mutual funds from investing in cryptocurrency. The financial regulator stated this in a directive released on Monday, and it comes amidst the uncertainties on crypto regulations in the country.

Don’t Invest in Crypto!

The directive reads that mutual funds cannot invest in cryptocurrencies or financial instruments whose value is tied to the prices of cryptocurrencies like Bitcoin. This means that crypto derivatives such as futures and options are also out of bounds for these funds.

The bank, which is Russia’s chief regulator, has been making consistent efforts to separate traditional financial institutions from digital assets which the country’s president, Vladimir Putin, described as high-risk investments. In July, it banned stock exchanges in the country from listing any financial instruments whose value depends on the prices of cryptocurrencies. The same letter also applied to mutual funds.

Despite limiting traditional financial institutions’ involvement in Cryptocurrencies, the Bank of Russia is planning a Central Bank Digital Currency (CBDC) backed by ruble. The digital ruble pilot program is set to launch next year, barring any change in plans. The draft directive was published for regulatory impact assessment and is open to comments and proposals until December 27, 2021.

New Investment Options for the Funds

By further banning them from crypto investments, it seems that the regulators want to limit mutual funds’ involvement with crypto. But mutual funds will have access to more investment opportunities as the new directives also include proposals that will facilitate new products entering the market. 

It will now allow open-ended mutual funds to invest in settlement derivative financial instruments and propose reducing the minimum share of liquid assets in open unit investment funds to 3% instead of the current 5%.

The ban on mutual funds crypto investment also affects funds managed exclusively by qualified investors. 

According to the bank, these initiatives will strengthen mutual funds and increase their investment potential while also protecting investors’ rights.