Russian Central Bank Bars Mutual Funds from Investing in Cryptocurrencies

The Bank of Russia has issued new rules for the mutual funds operating their businesses in the country, banning mutual funds investment in cryptocurrencies. - 2021-12-14T163152.848.jpg

On Monday, December 13, the country’s major financial regulator published an official statement on regulating investment opportunities by mutual investment funds. As a result, the agency banned mutual funds from investing in cryptocurrencies like Bitcoin or financial instruments whose values depend on the price of digital currencies.    

Although the document expanded the number of assets available for investment by mutual fund companies, it prohibited such asset management firms from purchasing crypto coins as well as financial instruments whose value depend on the prices of digital assets. The statement stressed that mutual funds managers are not allowed to provide crypto exposure to both unqualified and qualified investors.

In July, the central bank banned Russia’s stock exchanges from listing financial instruments that are dependent on the price of digital assets. Later part of the month, July 19, the regulator recommended that mutual fund firms should not engage with such products either.

However, local news agency RBC published a report, showing that there have been no mutual funds with cryptocurrency exposure in Russia, despite no formal ban issued in the past.

Attempts to crackdown on the growing crypto market

This is not the first time that the Bank of Russia is reflecting a hostile stance against the digital asset market. The regulator, which is known for its hard stance towards cryptocurrencies, released a fresh review of the financial stability report last month. The document indicated that the total annual volumes of crypto transactions in the nation have reached $5 billion.

According to the report, Russia is one of the most active crypto populations in the world and plays a rising role in the crypto ecosystem (worth about $2.8 trillion). The report also revealed that Russia is one of the world’s largest Bitcoin mining activities, ranking third in terms of hash rates.

Despite great interest among Russian citizens in cryptocurrencies, the Central bank is unfriendly to the industry. In the report, the regulator outlined major risks associated with the industry, citing a lack of protection, financial stability for investors and the potential to facilitate criminal financing and money laundering.

The Central bank stated that the relationship between the financial sector and digital currencies remains limited at the moment. In September, the agency asked commercial banks to block suspicious crypto accounts and wallets.  The regulator announced the move in a bid to combat money laundering, suspicious economic activities, and to protect the nation’s economy from scams and fraud.

Following the set of criteria issued by CBR, the bank advised commercial banks to identify and block crypto wallets, cards, and accounts of individuals engaging in fraudulent businesses. According to CRB, such shady businesses could include listed crypto exchanges, illegal forex dealers and financial pyramids. The regulator associates cryptocurrencies with money laundering and suspicious economic activities and therefore emphasizes the need to protect the nation’s economy from scams and fraud.

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Mudrex launches DeFi mutual fund model for retail investors

Cryptocurrency asset management firm Mudrex has announced the launch of its new Coin Sets investment vehicle.

The new offering allows investors to diversify their asset portfolio across a range of high-performing decentralized finance, or DeFi, assets, as well as nonfungible tokens, or NFTs. 

The niche financial model fosters the distribution of risk exposure in what is often considered a volatile marketplace, allowing investors to bet on the value proposition of an entire sector, rather than the individual potential of a single asset. The basket of assets is also rebalanced on a monthly basis to recalculate the risk and opportunity for investors. 

This is reportedly the first time a product of this kind has been launched to the retail marketplace, as opposed to mutual funds with similar design and functionalities that exclusively target high-net-worth clientele and institutional-grade investors.

Launched in January 2018, the San Francisco-based organization is experiencing a moment of expansion in registering over 40,000 users and has in excess of $15 million in assets under management.

In April 2020, the firm launched a digital asset trading platform titled Mudrex Invest, designed to provide automated expert trading services to regular individuals.

On Aug. 10, it was announced that the firm had received a seed funding raise of $2.5 million orchestrated by Nexus Venture Partners, with additional participation from the likes of Village Global and Kunal Shah, among others.

It is expected that the recent acquisition of funds will contribute to expanding the firm’s operational workforce, in addition to the deployment of further products and services.

Related: Portfolio rebalancing through DeFi must be simplified to see adoption

Cointelegraph spoke to the co-founder of Mudrex, Edul Patel, who commented on the identified target audience for the launch of the new product:

The demand for a simple to invest product like Coinsets is so universal that we have a lot of interest from across demographics. The product is especially attractive to new entrants into crypto who are quickly overwhelmed with the information overload in the asset class.

In addition, Patel revealed an innovative aspect of the Coin Set product that encourages a self-assembling approach to portfolio creation, as well as reporting that one of India’s largest portfolio management systems, MintingM, has utilized the model for their flagship product xMINT.

“One very interesting feature that we have enabled is letting pro traders/creators and influencers build their own Coin Sets and distribute it to their own communities to unlock wealth creation for theme.”