Bank of Russia

‘Token will defeat cryptocurrency’: Russia debuts palladium-backed stablecoin

Backed by a sanctioned Russian oligarch, Atomyze became Russia’s first legal digital asset manager, obtaining registration from the central bank in February 2022.

The Russian government-backed tokenization platform Atomyze has issued its first digital asset backed by palladium in collaboration with the local bank Rosbank.

Rosbank officially announced on Monday that it became the first partner of the Russian blockchain firm Atomyze, acting as an investor in Russia’s first digital asset deal with palladium.

According to the announcement, the newly issued digital asset is the first digital financial asset (DFA) issued through Atomyze. The platform obtained registration from the Bank of Russia in February 2022, becoming the country’s first legal digital asset manager.

Both Atomyze and Rosbank are backed by Interros, a Russian conglomerate and investment firm co-founded by sanctioned oligarch Vladimir Potanin. The CEO of the Russian nickel and palladium mining and smelting company Nornickel originally announced plans to tokenize palladium back in 2019 through a Switzerland-based palladium fund.

According to an announcement by Interros, Atomyze will serve as a key element of Interros’ digital ecosystem including Potanin’s recently acquired private bank Tinkoff, software engineering firm Reksoft and Rosbank.

“This is a truly significant event. Russian businesses and individuals have the opportunity to invest in this metal,” Potanin said in the announcement. The event also marks Russia’s economy entering a new period, the “era of tokenization,” the oligarch noted.

Potanin also expressed confidence that Atomize-issued digital financial assets like the palladium token will sooner or later displace cryptocurrencies like Bitcoin (BTC), stating:

Unlike cryptocurrencies […] industrial and other tokens are backed by physical assets, and the use of blockchain technology makes their transactions reliable, convenient and transparent. The token will defeat the cryptocurrency, pushing it to the sidelines of the digital economy.

While both Atomyze or Rosbank refer to the new investment product technically as the “palladium token,” the product has characteristics of a stablecoin backed by precious metals. “The innovative product entitles Rosbank to a cash claim equivalent to the market value of palladium,” the bank said in the announcement.

As previously reported by Cointelegraph, major global stablecoin issuers like Tether and Paxos debuted gold-backed stablecoins a few years ago.

The Moscow Exchange is a good base for crypto trading, Russian lawmaker says

MOEX is likely to do a great job in launching a crypto trading division due to its full compliance with the rules of the Bank of Russia, the official said.

Russia continues sending mixed messages about the legal status of cryptocurrency, with a parliament official urging the launch of crypto trading on the country’s largest stock exchange.

The Moscow Exchange (MOEX) is the best match for hosting a regulated crypto exchange in Russia, according to Anatoly Aksakov, head of the Russian Banking Association and a financial committee within the State Duma.

At a recent press conference, Aksakov stressed the importance of building a crypto exchange under the strict requirements of the Russian central bank, local news agency Prime reported on Thursday.

The lawmaker pointed out that MOEX is likely to do a great job in launching a crypto trading division due to its full compliance with the rules of the Bank of Russia.

“That division — which will work as part of a respected organization with great traditions and highly engaged in actively interacting with the central bank — will do an excellent job with the task of handling cryptocurrency operations,” Aksakov noted.

Aksakov’s remarks came shortly after MOEX said last week that it planned a legal challenge against European Union sanctions on the National Settlement Depository and would seek to protect the interests of Russian investors. The stock exchange was targeted as part of international sanctions against Russia in 2022 and had to suspend all operations for one month.

Global stock exchanges are popular destinations for digital asset-related products. Canada’s Toronto Stock Exchange is known for listing the world’s first Bitcoin (BTC) exchange-traded fund in 2021. Some European stock market operators like Deutsche Boerse have launched dedicated digital asset divisions listing a number of crypto investment products.

The latest report adds some confusion to Russia’s overall stance on crypto though as the Bank of Russia has been strongly opposed to opening a local regulated crypto trading platform.

“Cryptocurrencies should not be traded on organized marketplaces because these assets are too volatile, too risky for potential investors,” Bank of Russia governor Elvira Nabiullina said last month. A deputy governor at the bank also declared last year that Russia will only allow crypto trading via foreign trading platforms like Binance.

As previously reported, Russians have been actively investing in crypto in recent years despite the local government not legalizing a single local crypto trading exchange. All local trading has been facilitated either through foreign crypto firms or non-regulated local exchanges.

Russian central bank exec is OK with crypto mining under one condition

A finance officer believes it is necessary to sell the mined assets abroad to avoid the adoption of crypto in internal payments.

Kirill Pronin, head of the Russian Central Bank (CBR)’s department of financial technologies, acknowledged the possibility of crypto mining legalization under certain conditions. A public acknowledgment like this makes a rare case, as the CBR continues to lead the battle against the efforts to legalize crypto in the country.

The executive expressed his views on mining at the Saint-Petersburg International Legal Forum on Wednesday, June 29. During the session, dedicated to cryptocurrencies, Pronin revealed that CBR doesn’t take the same kind of hardline position on mining as it does in the case of general crypto legalization:

“Despite the fact that we are speaking up consistently for the prohibition of cryptocurrencies’ turnover […] the discussion regarding mining’ legalization is possible.”

However, Pronin named several conditions that, according to him, make this discussion possible. He insisted that the mined assets should be sold strictly abroad and in exchange for fiat money:

“Ultimately, we must say that there should be an export of these mining services, and the mining business shouldn’t lead to accumulation of cryptocurrency in the country, so there won’t be a motivation for a further usage in the internal payments.”

In a kind of personal reenactment of the ongoing battle for crypto between the CBR and the Ministry of Finance, the latter’s head of the department of financial policy Ivan Chebeskov vocally disagreed with Pronin and reminded him that there are notable challenges for Russian miners who would sell their crypto abroad these days.

Responding to that, Pronin stated that there are no problems with accumulating the mined wealth on the public blockchains and selling it with their help.

In May 2022, the fresh draft of the law “On Mining in the Russian Federation” appeared in the database of the lower chamber of the Russian parliament. The latest version spares the mining operators from the obligation to register in a special registry and sweeps away the earlier proposed one-year tax amnesty.

VTB sealed the first deal with digital financial assets in Russia

VTB Factoring acquires a tokenized debt pool of industrial companies via the Lighthouse blockchain.

VTB Factoring, a subsidiary of Russia’s state-owned bank, reported the first major deal with digital finance assets. As part of the deal, the bank subsidiary acquired a tokenized debt pool of the engineering company Metrowagonmash, issued via the fintech platform Lighthouse.

On Wednesday, June 29, VTB reported the deal on its webpage, claiming it to be the first issuance and placement of digital financial assets secured by cash in the Russian Federation. In the announcement, the bank compares it with the issue of short-term commercial bonds.

Anton Musatov, CEO at VTB Factoring, emphasized the new technology’s potential regarding the access of Russian businesses to the funds necessary for operational activities:

“Apart from the standard factoring procedure, [here] a client shouldn’t necessarily sign a service contract to sell its debt pool. The issuer’s readiness to tokenize it and the factoring bank’s decision to acquire it.”

In June 2022, the largest Russian bank Sber announced its first operation with the digital financial assets (DFA) to take place in mid-July, after finally obtaining a license from the country’s central bank.

While current legislation on the DFA was put in force in 2020, the head of the Financial Markets Committee of the Russian parliament’s lower chamber introduced a bill that would prohibit the use of DFA as a “monetary surrogate” in June 2022.

In February 2022, VTB conducted the first successful testing of the operation with “digital rubles,” a central bank digital currency (CBDC) project of the Bank of Russia. Later, the bank announced its first purchase of DFAs in exchange for the digital ruble. At press time, there is no information on whether the aforementioned deal was made via CBDC.

Bank of Russia backs cross-border crypto payments vs. domestic trade

Cryptocurrencies can be used in cross-border or international payments only if they don’t get into Russia’s domestic financial system, the Bank of Russia governor said.

Russia’s central bank governor Elvira Nabiullina is the latest official to confirm that the country is warming to the idea of cryptocurrency payments, but not domestic ones.

According to Nabiullina, cryptocurrencies can be used in cross-border or international payments only if they don’t get into Russia’s domestic financial system.

The digital currency should not be used as payment on platforms inside Russia, the Bank of Russia governor said in an interview with the local news agency RBC. That is why cryptocurrency prices are too unstable or volatile, thus risky for retail investors, Nabiullina argued, stating:

“Cryptocurrencies should not be traded on organized marketplaces because these assets are too volatile, too risky for potential investors.”

Nabiullina went on to say that digital assets must comply with all requirements and policies created to protect investors. As such, all assets that are listed on an exchange must have an emission prospectus and a responsible person as well as comply with information disclosure requirements.

The governor previously called on the government to focus on encouraging the development of digital asset projects that are being issued by a responsible person in April. She contrasted such a vision to private cryptocurrencies like Bitcoin (BTC), which don’t have one responsible party, while Bitcoin’s creator has not been identified at all.

Nabiullina’s latest remarks provide another confirmation that Russia might be preparing to start using cryptocurrencies for international trade. In May, first deputy governor of the Russian central bank Ksenia Yudaeva claimed that the Bank of Russia was open to allowing the use of cryptocurrency for international payments.

In October 2021, Russian President Vladimir Putin declared that it was “still premature” to use cryptocurrencies for settling trades of energy resources such as oil.

While growing increasingly interested in international crypto payments, the Russian government has been also doing its best to prevent Russians from using crypto as payment insi the country. After officially banning crypto payments as part of Russia’s major crypto bill in January 2021, the local lawmakers on Tuesday passed in the first reading another bill to prohibit the use of digital financial assets.

Russian bank Sber to complete its first digital currency deal

Sber was initially planning to launch its blockchain-enabled digital asset platform and the Sbercoin stablecoin by spring 2021.

Russian banking giant Sber — formerly known as Sberbank — is preparing to complete its first digital currency deal involving the bank’s proprietary digital asset platform soon.

The bank will conduct its first transaction involving digital financial assets (DFA) on its digital asset issuance platform by mid-July.

Anatoly Popov, deputy chairman of Sber’s executive board, disclosed Sber’s plans to complete such a deal in an interview with the state-backed news agency TASS on June 15.

Popov claimed that Sber finally received registration from the country’s central bank — the Bank of Russia — in spring 2022, following a series of registration delays. Sber has been struggling to register its digital asset issuance platform, initially expected to launch alongside its Sbercoin stablecoin by spring 2021.

While the latest news doesn’t directly mention the application of blockchain on Sber’s platform, Popov noted that the bank is committed to exploring the technology, stating:

“We are looking closely at the development of new technologies like distributed ledger technology. We are studying how blockchain technologies are developing. Our platform has already passed acceptance tests, and the first transaction will take place within a month.”

The news came in conjunction with VTB — Russia’s second-largest bank — also preparing to test the purchase of DFAs in exchange for Russia’s central bank digital currency, the digital ruble, in September 2022. VTB’s board member Svyatoslav Ostrovsky reportedly announced plans to launch a new platform to buy digital rubles at the Saint Petersburg International Economic Forum on June 15.

The Russian parliament passed a new bill in the first reading to prohibit the use of DFAs as payment for goods and services on Tuesday.