Russia’s central bank has begun exploring the use of central bank digital currency (CBDC) in order to settle cross-border transactions as a way around economic sanctions.
Kommersant confirms that experiments for the central bank’s plan will begin in the first quarter of 2023, but it remains unclear when a full-scale launch will occur. The Bank of Russia pointed out that cross-border settlements using CBDCs are not solely reliant on technology but on the prevailing geopolitical situation.
Given the mounting sanctions against Russia in the wake of its invasion of Ukraine, experts are predicting a frenetic approach to the development, suggesting that it could happen sometime in early 2024. Efforts to launch the digital ruble are already in place, with testing client-to-business (C2B) operations by selected financial institutions scheduled in the coming months.
“But, more importantly, if earlier the prospect of cross-border transactions with digital currencies of central banks (CBDC) was mostly spoken in general terms, then specifics appeared in the new presentation of the Central Bank,” Kommersant’s report read.
The bank of Russia presented two plans for the launch of cross-border capability for CBDCs. The first is that participating countries will enter into separate bilateral agreements to integrate a CBDC platform, allowing individual countries to control their method of operations.
Under the second option, Russia’s central bank suggests that the participating countries will be connected to a “single integration platform,” which has been described as an “advanced” alternative to the first because a common standard will control the system.
Pondering and scheming for a way around the sanctions
Multiple reports have claimed that Russia has been looking for a way to skirt the sanctions imposed against it since its invasion of Ukraine. Russia’s commercial banks have been kicked off the SWIFT platform, whipping up speculation that the country will turn to digital assets.
“Crypto assets are certainly being used to try and evade sanctions,” European Central Bank (ECB) President Christine Lagarde said. The concerns forced Western powers to issue directives to digital asset service providers to report suspicious activity on their platforms for sanctioned Russian entities and individuals.
Russia’s central bank and the Ministry of Finance have previously unveiled plans to deploy stablecoins in international payments to circumvent the sanctions. Russian legislator Anatoly Aksakov confirmed that China is a key partner in Russia’s plans to deploy CBDCs in international payments.
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.
Watch: CBDCs and BSV
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