Large Russian Banks are Testing Bitcoin and Cryptocurrency Investment Portfolios
Russia’s Cryptocurrency Push
According to Russian news site Kommersant, the banks concluded to “test boxed solutions for private banking, based on digital financial assets,” on June 13, 2018, during the discussion at the Digital financial assets for banks, funds, and large capital roundtable.
Under the guidance of the Bank of Russia, AlfaBank, the largest private bank in Russia, and Sberbank, the state-owned bank, will provide their clients the option to purchase shares in a fund. The fund will be trading the six top cryptocurrencies which include Bitcoin, Bitcoin Cash, Ethereum, and Litecoin, on large exchanges like Kraken and Bitstamp.
Sberbank and AlfaBank plan to work with the AddCapital investment fund, the National Settlement Depository, and Group IB. AddCapital will be responsible for the technical components of the project.
Anna Ivanchuk, the deputy head of Sberbank Private Banking, said:
“We want to offer our clients a completely transparent version of the entrance to digital assets that fully meets the regulatory requirements that will allow them to invest in an interesting product in Russia.”
Anton Rakhmanov, the managing director of Alfa-Bank’s Private Wealth Management block, believes that digital financial assets will soon become apart of our global economy and that they can’t be ignored any longer. “Our goal is to accelerate the adoption of a decision on the recognition of the CFA investment assets and introduce them into the legal field as quickly as possible,” said Rakhmanov.
The Russian Fund Operation
Alexei Prokofiev, the CEO of AddCapital, told Kommersant that two box solutions called Perceptron R and RQ would be used to pilot the cryptocurrency investment portfolio. These box solutions are simply algorithms that can adapt to changing situation on the market.
“Algorithms are deterministic, do not contain hidden parameters, they also work well on traditional financial assets,” said Prokofiev. “This was a requirement of partner banks.” The product itself is structured in a way where it’s “manageable” for the client.
The algorithm is highly dependent on the investment portfolio which will be made up of the six most popular cryptocurrencies. The currencies in the portfolio are reviewed once every quarter. The weighting for each cryptocurrency will change according to the algorithm. Prokofiev noted that the algorithms had provided greater yields than individual digital assets or assets made up of indexes.
“The client receives a fund unit,” said Prokofiev. “The assets of the fund are stored using custody solutions and audited by the Group IB cybersecurity. The unit is liquid; it is possible to request a withdrawal fro the currency of the client anytime.” Prokofiev added that trading could only be carried out on an audited cryptocurrency exchange.
AddCapital currently manages more than $60 million in funds. To enter and test the product, qualified investors would need roughly $500,000. The Russian central bank noted that the time it takes to pilot the project is only 45 days. Testing, however, can take one day to two weeks. The Russian banks have however not yet disclosed any specific dates.