Russia has confirmed that it will proceed with its digital ruble, a central bank digital currency (CBDC) issued by the Bank of Russia, which will be deployed in cross-border settlements with China.
Information picked up by Reuters stated that Russia’s plan to use its CBDC in international trade is part of its goal to reduce Washington’s control of the global financial system. The bulk of international trade is conducted in United States dollars, making it difficult for sanction-hit countries to conduct international business.
Earlier in June, Chairman of the State Duma Committee on Economic Policy Anatoly Aksakov told attendees of the St. Petersburg International Economic Forum that Russia is exploring different avenues to process international payments in the wake of imposed sanctions by the West over its invasion of Ukraine back in February. One of the alternatives available to the sanction-hit Russian state is using CBDCs on distributed ledger technology (DLT) to evade restrictions.
“The topic of digital financial assets, the digital ruble, and cryptocurrencies are currently intensifying in society, as Western countries are imposing sanctions and creating problems for bank transfers, including in international settlements,” said Aksakov.
“If we launch this, then other countries will begin to actively use it going forward, and America’s control over the global financial system will effectively end,” he added.
The imposed sanctions have seen Russian banks kicked off the SWIFT network, with experts commenting that the move could shrink the country’s economy by up to five percent. Having lost access to large portions of the global financial market infrastructure, there are multiple reports that Russia could be turning to digital assets like stablecoins and CBDCs.
Russia’s strategic partner, China, has been at the forefront of developing CBDCs, with its digital yuan reaching advanced testing stages. The digital yuan has processed over $12 billion worth of transactions and deployed in sporting events across China as part of testing ahead of a full-scale launch.
Russia’s waltz with digital assets for international payments
After months in denial, Russia’s regulators are finally embracing digital assets for cross-border payments. Deputy Finance Minister Alexey Moiseev confirmed that Russia was in talks with some countries over the possibilities of stablecoins as a settlement mechanism.
The Finance Ministry and the Bank of Russia have conceded that given the current geopolitical climate, “it is impossible to do without cross-border settlements in cryptocurrency.” Local publication Tass reported that the government plans to pass an overarching legislative framework to regulate virtual currencies for international payments, but a ban on local payments may complicate matters for legislators.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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