Russia Begins CBDC Settlement Mechanism While Sanctions Continue
Zach Anderson Jan 10, 2023 00:18
A central bank digital currency will be used to establish a cross-border settlement mechanism by Russia's central bank (CBDC). The plans are anticipated in 2023's first quarter. By2024, the Bank of Russia planned to launch its digital currency.
There are continuous sanctions against Russia as a result of its invasion of Ukraine; yet, reports indicate that Russia's central bank is about to begin building a cross-border settlement system that would use a central bank digital currency (CBDC).
According to a report that was published on January 9 by a local media outlet called Kommersant, the plans to move forward with Russia's digital ruble are expected to come in the first quarter of 2023. Russia's central bank will study two possible cross-border settlement models before moving forward with the plans.
In the initial version of the plan that has been suggested, different nations would integrate their CBDC systems by entering into separate bilateral agreements with Russia.
The second, more sophisticated approach suggests establishing a single hub-like platform on which Russia and other nations may engage with one another, sharing common protocols and standards to make it easier for linked countries to make payments to one another.
The other possibility was more developed, and he mulled over the possibility of implementing an initial two-way system, with China serving as the most probable partner due to the country's advanced political and technical preparedness.
According to reports from the month of September, Russia's plans to utilize its digital currency for settlements with China are reportedly expected to take place sometime in 2023.
Still, there are many who are of the opinion that Russia's CBDC play will not be hampered by technological limitations, but rather by political ones.
Alexey Voylukov, the vice president of the Association of Banks of Russia, stated that the introduction of a digital ruble will not change or improve the global political situation of Russia, and that trials for the CBDC platform can only be undertaken with countries that are friendly with the Russian government and are technologically ready. He also stated that the trials for the CBDC platform can only be undertaken with countries that are friendly with the Russian government.
However, the Bank of Russia had said that it intended to launch its digital currency by the year 2024, with all banks and credit institutions being linked to the network that is maintained by the CBDC.
Since Russia began a full-scale invasion of Ukraine in late February 2022, which marked an escalation in the conflict between Russia and Ukraine, Russia has been subjected to an increasing number of economic and commercial sanctions.
Since then, it has experimented with and mulled over methods to sidestep the sanctions, such as the country's central bank mulling over the possibility of using cryptocurrencies in the country just for the purpose of supporting international commerce.
In September, the Bank of Russia and the Ministry of Finance reached a consensus on a law that would enable Russian citizens to transmit payments across international borders using cryptocurrencies.
Image source: Shutterstock