Russia Stocks Plunge by 13%; War Fears Trickle Down on Cryptocurrency and Futures Contracts

The Russian stock market plummeted on Monday as war concerns sparked a massive sell-off, wiping off tens of billions of dollars from the value of some of the country’s most valuable companies.

Futures are Also Down

On Monday, U.S. market index futures also plummeted as Russian President Vladimir Putin recognized two separatist regions in eastern Ukraine, raising fears of a big conflict.

The Moex index plummeted by 6.5 percent, bringing its losses to about 13.21% over the last four trading sessions. The RTS index, which is dollar-dominated, dropped 7.3% to its lowest level since late 2020. The RTS market has lost more than a fifth of its value since the Russian military buildup on Ukraine’s borders began in October.

Putin highlighted Ukraine as an important part of Russian history, with eastern Ukraine including old Russian territory, and he expressed confidence in the Russian people’s support for his decision. Putin has ordered the Russian army to launch a “peacekeeping” mission in the region.

Futures on the S&P dropped by 0.7%, while Nasdaq futures fell by over 1%. The CAC40 in France plummeted 2.07%, German Dax by 1.94%, the Euro Stoxx 50 index by 2.13 percent. The losses in the UK’s FYSE100 were limited to 0.4%, and the IBEX35 index in Spain declined 0.7%.

“While the US continues to try to interact with Russia, there is no sign of a cooling off, and there has been no update on the anticipated meeting,” Siddhartha Khemka said.

The Market Could Continue Plummeting

While Russian authorities tried to reassure investors that the stock market’s freefall had “no economic basis,” foreign confidence in the country’s shaky banking sector is dwindling. There are concerns that the US would cut off Russian enterprises’ access to dollars. However, Russia’s economic future is of special concern to the west and lawmakers.

Anders Aslund, a senior at the Atlantic Council and Center for Social and Economic Research’s International Advisory Council chair, warned on Friday that Russian assets could fall even more.

Russia Inches Closer towards Legalizing Crypto

After weeks of debate between the Bank of Russia and the Ministry of Finance, a draft law on crypto regulation has recently been submitted. Last month, the Bank of Russia proposed a blanket ban on cryptocurrency mining and trade.

The digital currency bill will provide a licensing framework for platforms that facilitate the exchange of digital assets and prudential, risk management, data privacy, and reporting requirements for these operators. Buying and selling crypto would be permissible only through a bank account, and both crypto platforms and banks would be required to implement Know Your Client protocols.

It suggests a new test to determine a prospective investor’s knowledge level on cryptocurrencies and inherent risks. Those who pass the exams would be permitted to spend “up to 600 thousand rubles” (about Rs 5.5 lakh) in cryptocurrencies every year. Those who fail will be limited to “50 thousand rubles” (about Rs 46 thousand) in digital coin investments.