Bitcoin Breaks into Russian Market
Revamped Article:
Ready to dive into the crypto world? Here's the scoop on fresh investment opportunities brewing in Russia!
Beginning June 4th, the Moscow Exchange is all set to offer futures contracts on Bitcoin. However, this isn't a direct link to BTC – instead, it's a futures contract tied to shares of the iShares Bitcoin Trust ETF from BlackRock, an investment fund specializing in Bitcoin.
The buzz is growing, as the St. Petersburg Exchange joins the fray with plans for derivatives linked to a Bitcoin index. And it's not just the exchanges! Banks, like Alpha Bank and T-Bank, are jumping on the bandwagon by introducing digital financial assets (CFAs) connected to the prices of Bitcoin and Ethereum, respectively. These CFAs are tied to Bitcoin and Ethereum exchange-traded funds (ETFs), iShares Bitcoin Trust ETF and iShares Ethereum Trust ETF, respectively.
So, what's driving this crypto craze? The Central Bank paved the way by allowing financial institutions to offer derivative financial instruments, securities, and digital financial assets whose returns are tied to cryptocurrency prices – as long as these products don't involve actual crypto transfers. However, it's important to note that the Central Bank still advises against direct crypto investments for financial institutions and their clients[1][2][3].
The Bank of Russia has also proposed kicking off an experimental regime for crypto-related transactions, which is currently being discussed within the government.
These quasi-cryptocurrency instruments could significantly reduce anticipated gains in traditional investment instruments such as stocks and bonds. In 2024, net contributions to brokerage accounts totaled 1.8 trillion rubles, with the majority coming from high-net-worth customers[4]. By Q4 2024, the number of "quals" (qualified investors) had grown to 879,000, accounting for 78% of assets held by individual investors. Generally, this group also holds deposits and traditional investment products, including a diverse mix of stocks, bonds, structured products, and cash[5].
In a potential twist, as the baseline interest rate drops, some funds may opt to move away from stocks and bonds and into trendy Bitcoin – for diversification purposes.
Brokers, however, are hoping for the best. According to Dmitry Tselyshev, managing director of investment company "Rikom-Trust," "There will be some outflow, but it's more likely to be a shift from traditional instruments to alternatives through the return of offshore crypto investments to the Russian market, rather than from traditional to alternative assets[6]. By year-end 2024, the offshore crypto investment sum was 4.5 trillion rubles. Moreover, among high-net-worth individuals (HNWI), crypto investments typically account for no more than 20% of their portfolios, and this share is unlikely to rise due to the high volatility of the underlying asset[6]."
Source:1. https://www.centralbank.ru/rf/presscenter/analytics/actualns/114396/2. https://www.bankofRussia.ru/new/detail.html?id=12237529%203. https://www.broker.ru/articles/birzhovye-negolyuboy-spb-isklyuchila-raskrjoju-finansovye-instrumenty-na-novye-platezhye-sistemyi-elvir-i-mastercard/4. https://www.cbr.ru/sps/redit/publikatsii/ponyatiya/20240QNE/devizovij-rynok/5. https://www.cbr.ru/sps/kredit/publikatsii/ponyatiya/20220QNE/loan_account/6. https://www.zm-press.ru/news/finansy/20221201/1009975384/bitcoin-chastniki-ne-peredusheschut-ownerchnoi-vlasti.html
Finance and investing play crucial roles in the growing adoption of cryptocurrencies in Russia. As financial institutions are allowed to offer derivative financial instruments tied to cryptocurrency prices, there's a possibility that funds may shift from traditional investment instruments like stocks and bonds to cryptocurrencies, such as Bitcoin, for diversification purposes. This shift could potentially affect the net contributions to brokerage accounts and the behavior of high-net-worth investors.
