Russian Banks to Test Cryptocurrency Banking Solutions in a Regulatory Sandbox

Regulation 1 min, 57 sec READ

by Nick Tsakanikas

Russian banks will test private banking solutions for cryptocurrency-based products. Managed by AddCapital, the fund boosts cryptos' adoption.

A group of Russia's largest banks, including Sberbank and Alfa-Bank, plan to participate in a 45-day pilot to test private banking solutions using digital currencies. The Bank of Russia will outline the regulatory sandbox under which these products will operate during the pilot period. The end goal is to have products available for the public once the legislative framework is ready. According to the report, the decision was made last Wednesday during a roundtable entitled, "Digital financial assets for banks, funds and large capital: the position of the regulator and solutions for investors."

The pilot program will include two solutions, namely Perceptron R and RQ. Both are exchange algorithms, self-adapting to markets with low transaction volumes and can be equally compatible with traditional financial assets. The investment portfolio will consist of six of the most common cryptocurrencies including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. The algorithm will automatically review the selection of cryptocurrencies at the end of every quarter, as well as dynamically readjust their proportions in the portfolio. The minimum entry threshold for investors is set at $500 thousand.

Ava Ivanchuk, Sberbank’s Deputy Head of Private Banking 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.

Major Steps Toward Cryptocurrency Adoption

These products are the result of the collaboration between Sberbank, Alfa-bank, AddCapital, which currently manages a $60 million fund, and the National Settlement Depository, which will be responsible for keeping the assets in custody. Security will be guaranteed by Group IB, a company specialized in cybersecurity custody solutions, and Althaus will be in charge of the legal framework. The trades will be executed only on trusted and audited exchanges like Kraken and Bitstamp, while customers will be free to liquidate their assets at any time.

This is an important step forward for the adoption of cryptocurrencies in Russia, the legality of which has been extensively questioned by the Russian Central Bank. Regulations on digital assets are currently being explored and representatives of many major Russian banks have said that it is necessary to create a transparent and regulated environment for cryptocurrencies.