Translation. Region: Russian Federation –
Source: Central Bank of Russia
An important disclaimer is at the bottom of this article.
It is fundamentally important to clean up the cryptocurrency market in Russia.
The Russian financial market already has all the necessary infrastructure and a developed range of instruments, but without additional incentives for companies and the creation of a trusting environment for investors, Russia will face a very long road to achieving its ambitious goal of doubling its stock market capitalization. Vladimir Chistyukhin, First Deputy Governor of the Bank of Russia and member of the Board of Directors, spoke with RIA Novosti about achieving the goal set by the President, the IPO market, the entry of state-owned companies into the stock market, foreign investors and their frozen assets, and regulation and the legalization of the cryptocurrency market.
You've described the goal of doubling the Russian stock market's capitalization as super-ambitious. What needs to be done to achieve this?
To develop the equity financing market, we need the infrastructure and tools to enable issuers and investors to enter the equity capital market at the right time. We have all the necessary infrastructure and a comprehensive range of tools, including for retail investors. However, we still need to work seriously on issues affecting institutional investors and the issuers themselves. We need to create an environment for institutional investors that allows them to analyze the present and future of the companies whose securities they plan to acquire. We've been discussing these issues extensively over the past few years, arguing that despite sanctions pressure, companies should keep information to a minimum—only sensitive details—to avoid harming themselves. Dividend policies must be stable, and if for some reason their terms are not met, they must provide a compelling justification for why. Only then will institutional investors begin to invest more actively in equities. In a properly functioning market, it's institutional investors who set the tone and are followed by retail investors, and not the other way around. So, we still have a lot of room for improvement here.
The second issue concerns the issuers themselves. Unfortunately, in our market, bank loans are seen as virtually the only instrument for raising funds for projects. Furthermore, some companies are exploring the possibility of obtaining funding from the federal budget. For them to change their minds and enter the capital market, time and additional incentives from the government are needed. This debate has been ongoing for several years. The Central Bank is actively involved, but the final decision rests with the Ministry of Finance and the government.
We've repeatedly argued that the substantial subsidy programs currently focused on loans could be expanded to include equity financing, so that subsidies could also be provided to companies going public. Such companies should be provided with income tax breaks, at least at the federal level. Furthermore, we believe it would be appropriate for public companies to have priority over other companies in receiving state support: if companies meet the established criteria, priority is given to public companies.
So far, only measures concerning expanded subsidies for public offerings are being developed to a certain degree. I sincerely hope that these opportunities will be formally enshrined in law in the near future. No agreements have been reached yet on other initiatives. But I repeat that without incentives, we will be able to achieve capitalization growth naturally for a very, very long time. And reaching 66% of GDP by 2030 will be very difficult.
Finally, there's the issue of trust. A crucial element is the relationship between the company and its majority shareholder and minority shareholders. If a minority shareholder acquired shares in a company expecting one development scenario, and then something happens—the largest shareholder changes, the scope of operations expands, or the business is consolidated (through a merger or acquisition), the minority shareholder should, of course, have the right to exit the company and, accordingly, receive a fair price for their shares. This isn't always achieved in practice, which, of course, undermines trust.
– So, the task of doubling capitalization is impossible to achieve through purely organic means?
"You're right. Over the ten years from 2014 to 2024, the volume of initial public offerings (IPOs) amounted to one trillion rubles. And this was at a time when foreign investors were still active in our market, making large deals, adding volume and liquidity to the stock market. To achieve our target indicators, we need to issue at least one trillion rubles annually over the next few years. Clearly, achieving this goal naturally will be very difficult. This is compounded by the extremely unfavorable external environment. Shocks also negatively impact the capitalization of the Russian market.
Could the frozen assets of foreign investors in type "C" accounts become a source for achieving the goal of doubling the capitalization of the Russian stock market? There are suggestions in the media to "unpack the piggy bank."
"Type C accounts were introduced as a counter-sanctions mechanism, and they're still relevant today. What would happen if we opened Type C accounts in the current environment? Obviously, the securities would be sold, and the money would be transferred abroad. From a financial stability standpoint, this is a rather unfavorable development. And it would happen overnight. This would both fail to achieve our goal of stimulating investors and, as the saying goes, increase stock market instability out of nowhere.
Another issue we need to address is how to treat the funds in the "C" accounts of Russian investors who, in violation of the rules, purchased securities from non-residents from unfriendly countries. This is a very serious matter. We cannot use these assets to enforce sanctions because they belong to Russian residents. The question then becomes how to put them into circulation.
I believe the best solution would be to gradually introduce these funds into circulation to avoid jeopardizing financial stability, while simultaneously collecting fines or withholding taxes from Russian violators. Simply keeping them frozen for the long term is questionable. This issue is not a priority, but it will need to be resolved.
– And what volumes are we talking about?
We don't disclose the volume of assets held in Type C accounts. The only thing I can say is that the volumes are significant.
How do you view Dom.RF's IPO and the subsequent plans for other state-owned companies to go public? Will this provide a boost to the IPO market, or are larger-scale steps needed?
"Bringing state-owned companies to the stock market will undoubtedly contribute to increasing their market capitalization. We see that the Ministry of Finance is interested in state-owned companies entering the public market and is creating the necessary conditions for this. Dom.RF is the first and, in our view, a very good example. This company's management has made every effort to raise the bar for corporate governance."
We once developed a questionnaire for companies to assess their compliance with the corporate governance code and best practices. Dom.RF ranks very high in this survey. This could serve as a benchmark for other companies.
– In my opinion, the Dom.RF IPO is one of the few Russian company offerings in which the issuer discloses analytical reviews about itself, prepared by the organizing banks, on its website.
– Indeed, the practice of disclosing information during IPOs has deteriorated significantly over the past few years. It's difficult to find information about a company's value and its prospects. This isn't primarily due to sanctions pressure, but rather to a lack of pressure from foreign investors, particularly large institutional ones, for whom this was important and who set the tone.
You said foreign investors provided volume and liquidity, but now you're talking about pressure on issuers, in a positive sense. Do you think Russia needs foreign investors from friendly or unfriendly countries in the current situation?
Foreign investors brought three important elements to our market. First, as I've already said, additional liquidity and volume. And that's very significant. Second, so-called "long-term" money. These were primarily institutional investors willing to invest for the long term. This is quite different from the behavior of many investors present in our market. As a rule, these are short-term investors, even in the equity market.
Third, the quality of corporate governance. I repeat: they set the tone. Often minority investors, they defended their rights to the fullest extent possible. They actively resolved disputes, attended meetings, nominated members to the board of directors, and, when necessary, went to court. And most importantly, they imposed harsh penalties: companies that went public and then neglected minority shareholders could not count on foreign investment in the future.
Russian investors have a different mentality. We've issued a code of responsible investment, calling on everyone, especially Russian institutional investors, to unite and protect their rights. It's difficult to do anything alone. Self-regulatory organizations could act as a unifying force, but unfortunately, the conflict of interest—when they must side with the professional participants organizing the placement, which in some cases is the same issuer—prevents them from taking any drastic steps to protect minority shareholders' rights.
Currently, we often use soft regulation (issuing recommendations, principles, and approaches), but if practice shows that this is insufficient, we can transform it into mandatory norms through legislative decisions and regulations.
A well-known issue, and I believe it will have a positive outcome, is the codification of rules for issuing and maintaining a dividend policy in law. The Ministry of Economic Development is the main driver in this matter, and we fully support them. We believe it's right for the law to stipulate that a company must have a dividend policy, that it must be implemented, and that if it changes, it must be explained.
Returning to foreign investors, we understand that today's heightened external risks are preventing them from entering our market. Therefore, what we are doing today in terms of incentives, tools, and infrastructure is laying the groundwork for the future.
To attract investment from unfriendly countries, it would make sense to create simpler conditions not only for market entry but also for exit. This is possible with "In" accounts. There is some interest in this instrument, but we haven't yet seen any practical steps. Of course, it's only been a short time since they were introduced, and I believe it will only be next year before we can see how successful this measure has been. Furthermore, remote identification became possible some time ago. Russian banks can negotiate with foreign banks that will handle the necessary identification. The issue of simplifying tax registration is being addressed. But, again, this is all just preparation for the future.
In July, the Bank of Russia presented ten key areas for comprehensively increasing IPO transparency. Based on these, the regulator plans to prepare amendments to the current regulations. Critics have argued that these proposals will not revive the IPO market. When will these changes come into effect, and what impact do you expect them to have?
These proposals aren't aimed at revitalizing the IPO market, but rather at ensuring that public offerings take into account the interests of all parties: issuers, investors, and organizers. All three parties should have certain rights and responsibilities and should understand their role in the process. Unfortunately, in some cases, the interests of all parties aren't taken into account, and some are violated. For example, if we're talking about analytical reports, a company can currently provide some information about itself, while underwriters and brokers can also disclose other information. But this information is ultimately the property of affiliated parties who are interested in selling at the highest possible price. We believe it's right for companies to obtain independent analyst reports and publicly disclose them.
There were times when investors didn't understand how the allocation mechanism worked. They bid for a certain amount of securities, but received much less. Why did they receive so much? What were the principles? These are very serious questions that need to be answered.
The principle of price stabilization (market making) or the period during which the issuer and its affiliates cannot sell securities (the lock-up period) are often not disclosed. As practice has shown, some issuers have declared their intention to observe the lock-up period, but neither the terms nor the liability for non-compliance have been specified anywhere. This ultimately led to a situation where they verbally promised not to sell, but then sold whenever they felt like it.
Clearly, all of this undermines investor confidence in issuers and underwriters. Based on this practice, we prepared a report, discussed it with the market, and, by and large, agreed on regulatory changes.
We are confident that the adoption of new rules will significantly improve the quality of the securities placement process.
– When will this regulation come into force?
"I think we'll publish the draft regulation by the end of the year. Next year, we'll discuss it, adopt it, and submit it to the Ministry of Justice for registration."
Foreign banks have been given the opportunity to open branches in Russia. Do you think it's possible for other financial sector companies and foreign rating agencies to return to Russia?
"I would divide this question into two parts. First, to what extent are these companies willing to return? I haven't heard anything like that. They operate within the laws of unfriendly states. In some cases, these laws establish criminal liability for interaction with Russian economic entities. Sometimes, this applies not only to sanctioned entities but also to unsanctioned ones, as they could be suspected of evading sanctions."
The second part is: to what extent do we need, for example, foreign rating agencies to come to Russia? This is a very big question for me today. Over the past ten years, our national ratings industry has grown; four credit rating agencies operate in the market, and they do very high-quality work, maintaining high standards. In this regard, it seems strange to me to allow foreign participants into our market. At the same time, no one is stopping Russian companies from obtaining ratings from foreign rating agencies, not necessarily the "Big Three," in order to enter foreign markets. This practice exists.
In addition, we are collaborating with a number of countries, primarily members of the EAEU, to develop regulations for the mutual recognition of national ratings. This has begun to work and is already bearing fruit.
– I’m asking solely from the perspective of increasing competition in the Russian market…
"On the one hand, the more companies there are, the higher the competition. On the other hand, our market isn't that huge. Four rating agencies provide sufficient competition."
Fair competition should in no way be linked to dumping or other practices, which, of course, can be expected from major companies if they return to our market, especially given their capabilities. And we certainly don't want to face another situation where we find ourselves without ratings if, for whatever reason, foreign companies again decide not to operate in Russia.
Let's talk about cryptocurrency. How do you envision legislation governing cryptocurrency investment? What are the key changes that need to be made? Why did you abandon the experimental approach in favor of direct regulation?
We're currently discussing our proposals with the Ministry of Finance, Rosfinmonitoring, and other agencies. What are we gradually arriving at? First, we'll need to amend laws: on digital financial assets, on the securities market, and in banking legislation. It's expected that cryptocurrency transactions will be conducted primarily through existing market participants, under existing licenses. We believe we have all the necessary infrastructure for working with cryptocurrency. We need to consider whether we'll introduce a separate category of crypto exchangers. They might need a new license, but that needs to be discussed.
Secondly, it's crucial for us to "whitewash" this sector and make it regulated. This requires not only creating rules for how and through whom cryptocurrency transactions are processed, but also establishing strict restrictions and prohibitions. Anything outside this framework will be considered illegal. We also need to consider that the issue of cryptocurrency regulation is receiving significant international attention, primarily from the FATF. And given how meticulously they scrutinize our rules, we need to adopt regulations as quickly as possible. Therefore, we decided against conducting an experiment: we simply don't have the time to conduct it first, and then spend several more years analyzing and launching something permanent.
We are preparing proposals for legislative amendments, including several transition periods to ensure all participants have sufficient time to transition from the "gray" zone to the legal realm and operate normally. This law could be passed during the spring 2026 session, bringing it into force by the end of 2026. It is expected that penalties for illegal operations will begin in mid-2027.
– Were you able to agree on who should be allowed to conduct cryptocurrency transactions?
"Initially, we proposed creating a separate category of investors—super-qualified investors—and allowing only them to invest in cryptocurrencies. After a series of discussions, we abandoned this idea and agreed to allow qualified investors into this market, provided they pass certain testing. A final decision has not yet been made, but progress in this area is still possible."
Cryptocurrencies are currently being used not only as an investment but also as a means of cross-border payments. This is a crucial point that cannot be ignored. We certainly want to protect Russian retail investors as much as possible from transactions with such a risky asset. On the other hand, we understand that, under the current circumstances, some international payments can only be made using cryptocurrency. Therefore, the discussion continues.
How many investors do you think there are in Russia with access to cryptocurrency transactions? What size of the "legal" Russian cryptocurrency market can we expect after the introduction of direct regulation?
There are currently about a million qualified investors in Russia. Their testing should be based on questions about their understanding of cryptocurrency, nothing out of the ordinary. "Qual" investors will have no difficulty answering them and gaining the necessary status. If a decision is made to allow "non-qual" investors to do so under certain conditions, the circle of people able to conduct crypto transactions will expand. And here we must be extremely careful. Specifically, such investors could be granted access only to the most liquid instruments.
Market volumes are widely estimated, and it's a very complex calculation. However, the bulk of the market isn't concentrated in retail. These are either truly super-qualified individuals or companies that do this for both investment and financial purposes. There will be a "white market," and we'll collect reports, which will allow us to more accurately understand the scale.
What will happen to ordinary people who have already entered this "gray" zone and bought cryptocurrency? What will happen to their crypto assets?
If they are granted the status of an individual who cannot conduct transactions with crypto assets, they will be able to either hold them further, sell them, or exchange them for fiat currency or other assets. There will be no restrictions on withdrawing from crypto assets—either in terms of time or volume. Only new purchase transactions will be restricted.
– Are cryptocurrencies currently not used as widely in foreign economic activity as you expected?
"Indeed, the volumes involved in foreign trade are not that large. For various reasons. Due to the risks, Russian and foreign participants are wary of transferring a significant portion of their transactions to crypto assets. This also suggests that direct settlements through traditional banking channels continue to function."
We've done a lot to develop settlements in the currencies of friendly countries. The share of the ruble and a number of other currencies has grown significantly. Experience shows that, when relationships are structured properly, payments can be made, and this generally supports our foreign trade activities.
The Bank of Russia has authorized financial institutions to offer cryptocurrency-linked securities, digital financial instruments, and derivatives to qualified investors. Are you seeing increased interest in such instruments among qualified investors?
"No, we haven't seen any increase, but there is some interest. Trading in cryptocurrency-linked futures has been launched, and the open position in these instruments currently amounts to several billion rubles. The average daily trading volume is just under a billion rubles. Market participants themselves are in no rush to invest heavily in these types of instruments. They see the risks as quite high, the volatility is strong, and they are primarily securing their existing positions, hedging them, or hedging their foreign trade payments. In other words, this is essentially an additional instrument for hedging their existing claims or liabilities."
– Professional participants complained about the Bank of Russia's demands to restrict retail non-qualified investors from any information regarding such instruments.
"That's right, because today these instruments can only be offered to qualified investors. Why then arouse the interest of unqualified investors? What's the goal? To increase their risks? I don't understand it. It's a very strange position."
– Is it safe to say that your regulatory oversight is significantly stricter for those market participants who offer crypto-related instruments in Russia or through subsidiaries in neighboring countries than for those who do not?
"No, the attention is absolutely equal. Another issue is that we advised all professional participants not to offer crypto-related instruments to unqualified Russian investors. And obviously, we are working with those who, for various reasons, have not heeded our recommendations and are trying to convey our position."
We understand very well that retail investors are highly emotional about information, and given this, we can sway them to buy an extremely risky asset. If professional investors were held accountable for their actions for a couple of years afterward, it would be a different story. But they don't. They fulfill the client's instructions, and afterward, the client is left to deal with their problems alone. So, the attitude is the same; we just want our recommendations to be followed wisely.
In your opinion, does Russia need a dedicated investor ombudsman, as proposed by NAUFOR? Or are existing investor protection mechanisms sufficient?
– First, it's important to see how the guarantee system for individual investment accounts will work. We also need to understand what's not right about the current protection mechanisms.
Beyond the courts, if we're talking not only about shares but also about bonds, there's the general meeting of bondholders and representatives of bondholders. These institutions haven't functioned perfectly over the past ten years, but that doesn't mean they should be tossed aside and a new instrument invented. We plan to reform them to be more effective and best protect the rights of bondholders.
Only after this can we begin to discuss the issue of a special ombudsman.
How does the Central Bank of Russia view the sensitive cases of Domodedovo and Borets, where law enforcement agencies are freezing bond payments? Is this a new risk in the public debt market?
"As practice has shown, these are new risks for both bonds and stocks. On the one hand, I understand the government agencies' position very well: the state wants to restore its rights to an asset if it believes it fell into private hands illegally. Of course, the state must have every opportunity to reclaim it as quickly and effectively as possible."
On the other hand, in a number of cases, the rights of other individuals, also enshrined in law, are not taken into account. In these cases, we, within our authority, are engaging in dialogue with colleagues in law enforcement and the judiciary about the need for more precise wording. General wording could lead to non-compliance with the rights enshrined in the same legislation for other individuals.
What's very important is that we are being heard. I'm sure this is an excess of the first quick decisions.
In response to the Bank of Russia's order to offer Yuzhuralzoloto (UGK) shareholders a share buyback, Rosimushchestvo stated that there is no legal mechanism in Russian legislation for making such an offer. Is this true, and what, in your opinion, should be done to rectify the situation?
Our legal position is that the law contains clear provisions on this matter. We have not been provided with any legal opinions that would support a different position. When acquiring a large stake, the majority shareholder is obligated to offer minority shareholders a buyout. The law does not differentiate the right to make an offer depending on whether the owner is the state or a private individual. It makes no difference. You simply have to fulfill your obligation and move on.
Ilya Nesterov, RIA Novosti
Please note: This information is raw content obtained directly from the source. It represents an accurate account of the source's assertions and does not necessarily reflect the position of MIL-OSI or its clients.
