The governor of the Bank of Russia said her institution is discussing the potential use of crypto and CBDCs for cross-border payments. Although Russia opposes the use of cryptocurrencies for domestic transactions, it says it is open to their use in foreign trade.
Russia plans to integrate its CBDC into foreign trade
According to Nabiullina, the Russian central bank is developing a CBDC, or digital ruble, with integration functionality with other CBDCs. This would enable its use for fast, low-cost cross-border transactions.
Russia is actively seeking ways to continue trade with countries like China, India and Iran. These countries which fortunately have not adhered to Western sanctions. The integration of CBDC would greatly facilitate such exchanges.
Countries like China and the United Arab Emirates are also experimenting with CBDCs. Interoperability between these different sovereign digital currencies could create an alternative payment system. But also, it would reduce the dominance of the US dollar.
Russia thus hopes to maintain trade flows with key partners, despite its exclusion from SWIFT and other international financial infrastructures. CBDCs offer a way to do this outside of U.S. control.
Cautious opening to crypto
Although firmly opposed to their domestic use, Russia says itself open to crypto for foreign trade. According to Nabiullina, the use of cryptocurrencies like bitcoin would facilitate international transactions with countries that have not adhered to sanctions.
However, the legal framework surrounding such transactions is not yet in place. A bill in the Duma seeks to allow the use of crypto by certain entities. And this is subject to special permission.
The United States and the European Union have warned against Russia’s use of crypto to circumvent sanctions. They called on industry players to refuse any service that facilitates such transactions.
Russia is therefore moving cautiously, aware of the risks of secondary sanctions if Russian entities openly use cryptocurrencies. But in a context of increasing financial restrictions, crypto offers a potential valve to maintain exchanges with non-aligned partners.
Russia’s interest in crypto and CBDCs demonstrates its active search for ways to pursue international transactions despite its exclusion from the Western financial system. The use of sovereign or decentralized digital currencies could allow Russia to maintain vital trade links with key partners like China and India. However, legal and geopolitical obstacles remain.
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