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Russia's Largest Banks Are Piloting Bitcoin and Crypto Portfolios

Two of Russia’s largest banks are piloting cryptocurrency portfolios for their private clients, the Kommersant newspaper reported Friday.

Under the watch of the Bank of Russia, Sberbank and Alfa Bank will offer their clients shares in a special fund that will be trading the six most popular cryptocurrencies on major exchanges, including Kraken and Bitstamp, according to the report.

Sberbank, the main state-owned bank responsible for processing government employee paychecks, and Alfa Bank, the largest private bank in the nation, plan to enter crypto trading with the help of the AddCapital investment fund, the National Settlement Depository and Group IB.

Sberbank Private Banking deputy chair Ana Ivanchuk said:

“We’d like to offer our clients an absolutely transparent way to invest in digital assets with a full compliance with regulations that will let them invest in the product they are interested in Russia.”

“Our goal is to speed-up the recognition of the digital assets as legitimate financial assets as soon as possible,” said Anton Rakhmanov, manager of Alfa Bank’s private banking branch.

AddCapital, the investment fund which participated in the recent pre-sale of Telegram tokens, is said to be in charge of the technical solution for the project. CEO Alexey Prokofyev said the investment process will see investors purchase a share of the fund.

The portfolio will include the six most popular cryptocurrencies, including bitcoin, bitcoin cash, ethereum and litecoin. The combination of coins will be revised four times a year, and their proportions will be balanced by a trading algorithm.

“The shares are liquid and a client can send them for fiat currencies any time,” Prokofyev said.

The National Settlement Depository, which is a part of the Moscow Exchange Group, will act as the custodian. While testing the portfolio process will take roughly 45 days, the specific dates have not been disclosed.

Sberbank declined to comment when reached.

Russian flag image via Shutterstock

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Russian Treasurers Association Joins Masterchain Banking Pilot

The Russian Association of Corporate Treasurers is joining the nation’s central bank in trialing the government-run Masterchain blockchain platform, the group announced last week.

The association is testing Masterchain to facilitate communications within the national banking system, according to the Masterchain white paper. This would mark the latest move to use the platform to replace the SWIFT inter-bank communication network, a use case which was first discussed in April 2018.

The platform was created by the nation’s FinTech Association in collaboration with Russia’s 14 largest banks, including VTB.

According to the white paper, the system will include Russian banks and government agencies responsible for contract registration and market regulation. FinTech is claiming that switching to Masterchain in processing mortgage contracts will reduce operating costs up to five times and instead of days the transactions will take minutes.

The project also is expected to produce a KYC mechanism based on a digital identity so that banks will be able to share credit histories and information about fraud cases without breaking bank secrecy. The system is also going to deal with bank guarantees and letters of credits

However, as previously reported by CoinDesk, the ultimate goal for Masterchain is still to replace SWIFT. In particular, concerns that U.S. or European Union sanctions against Russia in 2014 might eventually remove the nation from the SWIFT system have spurred Russia’s experimentation with alternate financial communication systems. Previous tests have shown issues with processing different document format.

Russian flag image via Shutterstock

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Russian Government Resolves Disagreement on Draft Crypto Law

The Russia Federation is inching closer to deciding on a law covering initial coin offerings (ICO) and the trading of crypto tokens within the country.

According to a report by Russian news agency RIA on Monday, Russian deputy finance minister Alexei Moiseev said that a jurisdictional disagreement between the Bank of Russia and the Finance Ministry over the content of a draft law to govern cryptocurrency related activities in the country has been resolved.

As previously reported, the Finance Ministry has filed a draft that would impose a threshold for ICO activities in Russia as an effort to allow token sales under a regulated environment.

However, whether the law should allow these token offerings to be exchanged with Russian rubles and other assets drew conflicting opinions from the Bank of Russia, the country’s central bank.

However, as the country is eying a summer deadline to roll out the new law, the two government bodies have reached a consensus that the Bank of Russia’s opinion will take precedent, according to Moiseev.

“Yes. The central bank will make a decision,” he said.

According to RIA, the Bank of Russia said that it may now consider the option of allowing investors to exchange tokens issued under the proposed ICO framework with fiat currencies. However, crypto-to-crypto trading may not be permitted, in an effort to avoid “questionable” anonymous transactions, RIA said.

Alexei Moiseev image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Afraid of ICOs? Bankers Heap Criticism on Token Tech at Exchange Event

Several high-profile banking executives had not-so-nice things to say about initial coin offerings (ICOs) at an event in New York City this week.

Hosted by the Moscow Exchange Group, around 400 attendees were present, including central bankers and representatives of the “Big Four” accounting firms. And though a range of topics was discussed, none proved more top-of-mind than the blockchain token sector.

In line with the wider discourse on display in recent weeks, the first deputy governor of Russia’s central bank, Ksenia Yudaeva, went so far as to compare ICOs to the pyramids schemes of the 1990s that cost investors hundreds of millions of dollars.

The comments come at a time when government bodies throughout the world are investigating the blockchain use case, with some taking a heavy hand and banning token sales, while others have been more open-minded to the possible advantages of the tech.

Yudaeva, though, is not in the latter camp. She told the audience:

“They tried to attract a lot of ordinary people to get high gains from nothing, in a short period of time, but then all these people had high losses in a short period of time.”

And the negative pressure that these fundraising efforts have put on the economy is something Yudaeva, who reports directly to the Russian central bank’s governor, said she fears might happen again, stating: “We are very much afraid of this problem. We are very skeptical.”

Whatever the potential benefits of blockchain itself might be, she continued, cryptocurrencies are no longer viewed by the bank as a legitimate means of exchange.

“Our opinion is that the ruble is the only payment instrument in Russia and we think we should be extremely careful with cryptocurrencies and how they work,” she said.

The comment aligns with those made by Russian Vladimir Putin when he called cryptocurrencies “serious risks” recently. But they also stand in stark contrast to a regulated Russian clearing house agreeing to host its first sanctioned ICO just a month ago.

‘Cute’ technology

Following Yudaeva’s comments, global chief economist at Citi, Willem Buiter, went even further in his condemnation of cryptocurrencies and ICOs.

“I think that cryptocurrencies are going to meet the fate with other authorities that they have met with China’s authorities,” he said, alluding the country’s ban of token sales.

ICOs “will be cracked down upon,” Buiter said.

Buiter, like Yudaeva, also gave a nod to the potential benefits of blockchain itself, but quickly returned to disapproval with the way some people and companies are using the technology.

“Initial coin offerings are just regulatory arbitrage to avoid IPO restrictions,” he said, referring to initial public offerings on which companies raise money by selling stock shares on a regulated exchange.

Buiter concluded with a little grudging praise for ICOs, saying:

“Cute, and I admire the ingenuity – but it is pure regulatory arbitrage, and the regulators are always a couple of years behind – but they’re catching up.”

Image of Ksenia Yudaeva via Michael del Castillo for CoinDesk

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Central Banker Reveals Unlikely Next Act: Helping Merchants Mint Cryptocurrency

While the Bank of Russia has long been at the forefront of central bank cryptocurrency exploration, for Vadim Kalukhov, its recently departed director, exploration alone wasn’t enough.

Instead, Kalukhov wanted to move faster than central banks typically do, experimenting and in turn, launching a product. So in May, Kalukhov left the central bank to start something of his own. Flash forward to today and Kalukhov is chief information officer at Crassula, a brand-new blockchain startup that’s anything but ordinary.

In his first interview revealing the project, Kalukhov, who helped develop the Bank of Russia’s masterchain blockchain platform, described how his experience in global finance prepared him to help others do what had previously been the exclusive domain of central banks: mint money.

Kalukhov told CoinDesk:

“The Crassula open system will allow merchants to build add-ons including their own cryptocurrencies.”

Similar to how ethereum enables users to launch tokens through initial coin offerings (ICOs), Crassula is aiming to help corporates (and eventually governments) issue their own cryptocurrencies. While Kalukhov declined to share details about the platform’s construction, he did give insight into a couple features that stand out.

Unlike ethereum, the platform will be designed as a private blockchain solution with a native wallet for digital fiat and cryptocurrencies. The platform is also expected to run code from the open-source Lightning Network, a scaling proposal originally developed for the bitcoin blockchain.

But technology aside, what is perhaps the project’s most interesting trait is its evolution out of an existing payments startup in Russia, one with both existing clients and existing profit.

Evolving payments

Indeed, the story isn’t as simple as Kalukhov just launching his own endeavor.

Shortly after leaving the Bank of Russia, Kalukhov began discussing ideas with Daria Dubinina, a co-founder of Payment Ninja, a venture-backed startup that bills its service as “almost free” payments using the Symfony PHP web application framework.

With Payment Ninja’s mission basically the same, save for its use of technology, Crassula was soon spun-off with the goal of creating an ecosystem where users could spend cryptocurrency on everyday products. It wasn’t a huge leap, in that Payment Ninja had already created an ecosystem of merchants and was interested in experimenting with blockchain as a way to make its platform even more useful.

After exchanging a series of “small white papers,” Kalukhov was won over by the idea of a collaborative effort with Payment Ninja.

In interview with CoinDesk, Dubinina described the network, saying:

“The final stage of building the Crassula ecosystem would be an open platform on which each company, no matter if it’s a small business or a big business, a financial organization or a governmental organization – any company – could issue their own cryptocurrencies and build their own payments systems.”

But whereas ethereum has helped startups use the ICO mechanism to raise capital, Crassula hopes to leverage its existing merchants and new clients to create an ecosystem that powers the exchange of goods.

Planning for growth

And for this, existing merchants that are migrating to the Crassula platform could prove highly important. For one, they mean the company is not only generating revenue, but is profitable, according to Dubinina.

As a result of that existing momentum, earlier this month Crassula hired its eleventh employee and first lead blockchain architect, Anatoly Resin, who was previously a core developer on the Decent blockchain.

Yet, building the blockchain platform won’t be cheap, and so to continue growing the team Crassula is planning to launch its own ICO.

Fresh off winning a startup “battle” in Kiev, Crassula plans to formally reveal details about its token sale campaign, which will have a soft cap of $7 million and a hard cap of $35 million, this autumn.

But while this all may seem like an unlikely turn for a central banker, Kalukhov argued that utilizing the more experimental capabilities of blockchains is perhaps best viewed as a matter business.

Kalukhov concluded:

“We are doing this work because we believe in the project, and we invest our time and our money in order to reach the time when our project is live and it will be easy to deliver this widely to the people.”

Vadim Kalukhov image via Crassula

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Russia is Working on Legalizing Status of Bitcoin, Other Cryptocurrencies: RT

Russia is in the midst of legitimizing cryptocurrencies. It is developing a legal framework that will govern transactions using digital currencies like Bitcoin, RT reports.

Russian Finance Minister Anton Siluanov conveyed this at a recent financial forum in Moscow. He assured Russian users of Bitcoin and other cryptocurrencies that the government will not outlaw nor penalize people who use cryptocurrencies.

It is a complete turnaround from the Russian Ministry’s stance last year, emerging after President Vladimir Putin signified approval for digital currencies.

Putin helps

Putin had met with Ethereum Founder Vitalik Buterin, who ingrained the merits of Russia’s usage of the Blockchain, the technology underlying Bitcoin. Thereafter, a consortium of lenders have mulled over the possibility of using the technology to cut costs. Meantime, a presidential aide had announced plans for an initial coin offering (ICO).

Finance ministry wobbling

The Russian Finance Ministry had previously balked on and considered prohibition of the use of cryptocurrencies in apartments which it deemed unsafe. Now that it has gotten backing from Putin, and the state has realized that digital currencies are part of the new economic realities, Siluanov said there is no point in outlawing them. He said the next move is to draw up a bill before yearend to regulate cryptocurrencies.

Siluanov has yet to disclose further details, but merely said that the Russian Ministry’s goal is to make the purchase of cryptocurrencies covered by law to in the same manner as buying treasury bonds and other securities.

Bank of Russia Governor balks

As with other technology trends, digital currencies have not won over everyone. In Russia, there are still non-believers. Bank of Russia Governor Elvira Nabiullina, for instance, referred to the global commotion over digital currencies as a “gold fever” sweeping nations, and expressed misgivings over their use as a surrogate for money.

In other news, China has not been as receptive to the growing demand for cryptocurrencies. In fact, its financial regulator plans to shut off major Bitcoin exchanges has led to Bitcoin’s price plummeting.  

There has also been much speculation over cracking down on cryptocurrencies, following a recent decision by The People’s Bank of China (PBOC) to outlaw fundraising through ICOs, which have surged in popularity.