Russia’s Central Bank Instructs Clearinghouse Not to Settle Cryptocurrency Contracts

The Central Bank of Russia has sent a letter to one of the country’s biggest clearinghouses, instructing them to refuse to clear and settle over-the-counter (OTC) contracts based on cryptocurrencies. The clearinghouse has been named as a partner to multiple initial coin offering (ICO) projects.

Also read: Russia Proposes Adding Cryptocurrency to the Population’s Financial Literacy Strategy

Central Bank’s Instruction

The Russian Central Bank has sent a letter to a major clearinghouse in Russia, the MFB Clearing Center, advising them against dealing with cryptocurrencies, according to local publications. “The Bank of Russia demanded that the MFB Clearing Center, which belongs to NP RTS, refuse to deal with cryptocurrencies, recognizing its risk management system as unsatisfactory,” Vedomosti reported on Tuesday.

The MFB Clearing Center provides clearing services in the securities and commodity exchange markets in Russia. It was established by the NP RTS Association, which is a “non-commercial partnership for the development of the RTS financial market,” its website described. The association’s other projects include the St. Petersburg Stock Exchange, the “Voskhod” investment platform, and the RTS Board.

The clearing center plays an important role in the St. Petersburg Stock Exchange’s trading and clearing infrastructure. It acts as the “central counterparty in transactions with foreign securities” for the exchange, the association explained. The St. Petersburg Stock Exchange is currently the third most active stock exchange in Russia by volume and the largest outside of Moscow.

At the end of August, the MSB Clearing Center posted new clearing rules on its website which included provisions on clearing OTC contracts based on cryptocurrencies, Tass reported. In response, the central bank wrote in its letter to the clearinghouse:

The MFB Clearing Center should exclude from its clearing rules the provisions that provide for clearing obligations arising from over-the-counter electronic contracts and submit a new version of the rules to the Bank of Russia for registration.

Involvement in ICO Projects

Despite publishing “an inoperative version” of its clearing rules, Tass wrote that the clearing center’s partners “the digital platform Voskhod and NP RTS – repeatedly announced projects with digital assets, including crypto assets, with the participation of the clearing center.”

The Voskhod platform was launched by the NP RTS Association and the Far East Development Foundation last year. Last month, news.Bitcoin.com reported on the platform being the first to gain approval from the central bank to work with cryptocurrencies.

The platform aims to raise “equity and debt capital to dynamically develop small and medium-sized companies in the Far Eastern region,” the association described.

Recently, the association agreed with the farm cooperative Lavkalavka to jointly launch an ICO called Biocoin on the Voskhod platform, Kommersant reported. “We are holding an ICO on the site Voskhod from November 1st,” Biocoin announced on Wednesday.

In addition, the Voskhod platform announced this week that it expects to start trading the D1 Coin secured by Far Eastern diamonds in January next year.

Lack of Appropriate Crypto Measures

The central bank performed a comprehensive analysis of the clearinghouse’s rules and concluded that “the risk management system of the MFB Clearing Center is unsatisfactory” for the clearing of OTC contracts using cryptocurrencies. The regulator was quoted by Tass:

In particular, the risk management system of the MFB Clearing Center does not currently provide an approach to managing legal risk associated with the fact that transactions with cryptocurrencies are committed outside the legal regulation of the Russian Federation and may bear the signs of involvement in illegal activities, including legalization of income received by criminal means, and the financing of terrorism.

What do you think of the central bank instructing the clearinghouse to refuse to clear and settle cryptocurrency contracts? Let us know in the comments section below.

Images courtesy of Shutterstock and St. Petersburg Stock Exchange.

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