Russia’s Central Bank has given qualified investors the green light to trade crypto-linked derivatives. However, customers will only be able to purchase these financial instruments with Fiat, and not cryptocurrencies. This move highlights Russia’s softened stance toward digital assets. 

Banks and certain financial institutions can now provide cash-settled crypto derivatives because of the new guidelines. This means that Russians can now benefit from crypto price changes without owning the digital assets. But, it’s crucial to note that the Central Bank of Russia has not changed its stance against retail crypto purchases. 

Qualified Investors to Access and Trade Crypto Derivatives

As per the official announcement by Bank of Russia, qualified investors can now access crypto derivatives. This comes as the financial institution allowed other financial institutions to offer financial instruments in which profitability is based on crypto asset prices. This means that these investors can now take part in trading financial products that mimic the changes in prices of Bitcoin and Ethereum. 

“Financial institutions can offer qualified investors derivative financial instruments, securities and digital financial assets, the profitability of which is linked to the value of cryptocurrency. The key condition is that such instruments should not provide for the actual delivery of cryptocurrency,” Russia Central Bank wrote. 

However, investors will only take advantage of crypto price changes through cash-settled instruments, without holding these assets directly. For example, an investor can buy a Bitcoin future contract for $100,000. If the contract lasts and Bitcoin hits $105,000, the investor will gain $5,000 in profit. 

The model reflects the Central Bank’s decision to be cautious with cryptocurrencies. By allowing custody as a service, this makes it possible for institutions to take part in crypto markets without facing much risk. Hence, Russia believes the new way of doing things is a safer choice for professional investors who are eyeing to capitalize on the potential of digital assets. 

Derivative Tools To Offer Risk-Managed Crypto Exposure

Russia aims to use the cash-settled cryptocurrency derivatives to enhance the security of trading in the market. By using cash settlements instead of direct crypto trading, investors get to enjoy reduced risks associated with cryptocurrencies. This model is consistent with financial market conventions used in Russia. 

Russia’s Central Bank also made it clear that it does not advocate for direct investment into crypto. This cuts across the financial institutions as well as their clients. But, the bank also confirmed that it is awaiting the approval of an experimental phase in direct crypto exposure from the Russian government. 

“We still do not recommend financial institutions and their clients to invest directly in cryptocurrencies. The Bank of Russia’s proposals to launch an experimental regime, where only certain categories of investors will be able to make transactions with cryptocurrencies, are being approved by the Government,” the bank remarked. 

Additionally, only financial institutions regulated by the Central Bank are allowed to provide crypto related products. Management of these contracts will be handled by banks and licensed financial firms. The main purpose of this structure is to help avoid fraud and obey all current financial laws. 

Through cash settlements, Russian regulators can monitor and assess risks easily. Russia’s Central Bank will also use the straightforward structure to notice deviations and make sure rules are followed. Furthermore, offering investors crypto-linked products requires that financial firms be upfront about their operations.