“Mutual Funds Shouldn’t Be Allowed To Invest In Digital Currencies”, Argues Russian Central Bank

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Mutual funds in Russia will be forced to quit investing in digital currencies as the Central Bank of Russia (CBR) is of the view that they shouldn’t put the money of the people at stake for investing in digital currencies which are highly speculative and therefore pose grave monetary losses. The proposal of prohibiting mutual funds stemmed from the earlier decision of CBR where the bank had advised exchanges not to deal with securities that are pegged with digital currencies. Comments, recommendations, and feedback are awaited by CBR on the proposal.

Since the launch of digital currencies, CBR has never appreciated their invention and never intended to support them even impliedly. Instead, it maintains a strong stance against digital currencies in Russian Federation and rejects them as being assets or instruments of investment.

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Some time ago, CBR had issued policies for the trade exchanges in the Russian Federation. In these policies, CBR warned them they should avoid dealing with securities that are pegged with digital currencies. Without raising any objections, the exchanges immediately stopped trading with securities that involved digital currencies.

Now there has been the latest proposal by CBR which too relates to digital currencies. This time CBR wants to introduce another policy that suggests that mutual funds shouldn’t be allowed to invest in cryptocurrencies, including Bitcoin. The proposal further notes that the policy would also be applicable to the derivatives. This would mean that the trading of securities whose values are pegged with digital assets must be prohibited also.

While giving its proposal, CBR deliberated upon the reasons behind introducing the policy for mutual funds. CBR argued that mutual funds involve money belonging to people and therefore it is the people whose interests are at stake. While it is true that digital currencies such as Bitcoin are highly speculative which could, in turn, result in enormous monetary loss because of volatility. The bank also referred to 2021’s massive price reduction in Bitcoin wherein the value sank by almost 50% from US$ 60,000 to US$ 30,000.

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CBR further clarified that if the policy is approved, then it would subsequently be for everyone. For instance, there will be no exception even for qualified investors, said CBR.

CBR’s proposal is out now until 27th December 2021 for receiving comments, recommendations, and feedback. The decision of CBR to impose restrictions of investment upon mutual funds stemmed from its earlier warning which was for exchanges. Exchanges and brokers were warned not to offer investment opportunities of securities involving cryptocurrencies. They were further warned that the same rule shall apply to both types of investors i.e. qualified and non-qualified traders.

As before, CBR wants to introduce a crypto policy under the garb of ‘investors’ protection’.

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