Russia intends to use the digital ruble, to be introduced early next year, to settle payments with its key ally, China. Moscow officials hope that other countries will be willing to adopt Russia’s digital currency in trade and avoid sanctions imposed by the war in Ukraine.
The Russian Federation will look to the digital ruble to pay for trade with China
Russia’s central bank appears to be preparing to begin payments in digital rubles, a new form of Russian fiat currency that is currently being tested, as early as 2023. According to statements by a leading member of the lower house of the Russian parliament, the sanctioned countries want to use it to settle payments with China, which has become Russia’s main trading partner.
Financial regulations introduced in response to the military invasion of Ukraine have restricted access to the global financial system, forcing Russia to seek alternative means for foreign trade transactions. Along with cryptocurrencies, the digital ruble is one of the options Moscow is considering in its efforts to circumvent sanctions.
Anatoly Aksakov, head of the State Duma’s Financial Markets Committee, recently told the newspaper Parlamentskaya Gazeta that “the topic of digital financial assets, digital rubles, and cryptocurrencies is currently intensifying as Western countries impose sanctions and create problems for bank transfers, including international payments. intensifying in society,” he said.
The high-ranking senator elaborated that digital direction is key because financial flows can bypass systems controlled by unfriendly countries. He added that the next step for the Central Bank Digital Currency (CBDC) issued by the Bank of Russia is to introduce it into mutual payments with China. Also quoted by Reuters, Aksakov stressed that.
Once this is initiated, other countries will be willing to use it in the future, effectively ending the US dominance over the global financial system.
The loss of Western markets, including energy exports, has greatly increased the importance of cooperation with China for Russia. Trade between the two countries has expanded, and Russian companies have begun issuing yuan-denominated bonds. Beijing is currently conducting domestic trials of a digital version of the e-CNY, which it plans to use for cross-border payments.
Russia is preparing to adopt comprehensive regulations for the crypto market in the coming months, including new legislation “on digital currencies” that will expand the legal framework established last year by the “On Digital Financial Assets” law. Russian regulators have already developed mechanisms for international crypto payments, with respective draft provisions already agreed upon by the Central Bank and the Ministry of Finance.
Image credit: Shutterstock, Pixabay, Wiki Commons