The Russian PM Has Set December 2022 As Deadline For Clarifications On Use Of CBDCs And Digital Currencies
After successfully mitigating the SWIFT ban, Russia is in the advanced phases of its central bank digital currency (CBDC) development. As per the reports, Moscow plans to settle cross-border payments using its digital currency in the future.
De-Dollarization Of Global Economy With CBDC
The report by Reuters hints at the launch of Russia’s CBDC early next year. The first major step that Russia aims to take is settling cross-border payments with China using its CBDC. The step is clearly aimed at the de-dollarization of the global economy. Moreover, Moscow and Beijing are working closely to end the dominance of the US Dollar. The reports of Moscow and Beijing settling cross-border transactions through CBDCs come months after the report that hinted that the Chinese Digital Yuan might assist Russia in bypassing the SWIFT ban.
Russia’s Access To International Trade Market Limited
Despite all the close cooperation between Beijing and Moscow, the SWIFT ban and other sanctions that followed the Russia-Ukraine crisis have substantially damaged Russia’s economic prowess. The admission by Anatoly Aksakov, head of the finance committee in Russia’s lower house of parliament, that the ongoing geopolitical crisis has limited Moscow’s accessibility to the international trade market, further strengthens the argument.
Bolstered Efforts To Launch A CBDC
As the administration in Moscow realizes the gravity of the situation, the ‘do it now’ button has been pressed to come up with a long-term potential solution- the country’s own central bank digital currency (CBDC). Russian Prime Minister Mikhail Mishustin has set December 2022 as the deadline for issuing clarifications on using digital currencies and digital assets for cross-border settlements. In the meanwhile, Russia is aggressively using the Chinese digital Yuan, to minimize the impact of the SWIFT ban and end the monopoly of the US dollar. Interestingly, the Chinese Yuan accounted for as much as 26% of Russia’s foreign transactions in August. “Buying RMB allows professional market participants to manage a position in unfriendly currencies – primarily in US dollars since there is a high correlation between CNY/RUB and USD/RUB rates. On the long-term horizon, these currency pairs change in the same direction; insignificant differences in the movement of rates are observed only in certain short-term periods,” the Central Bank of Russia said in a statement.
As several major economies take steps to de-dollarize the global economy, China’s Yuan is emerging as another popular currency with substantial acceptance.
The Future Of Cryptocurrencies In Russia
There have been reports of Russia using cryptocurrencies to evade the SWIFT ban since the beginning of the Russia-Ukraine crisis. The first concrete evidence came to the fore after the Bank Of Russia’s decision to legalize cryptocurrencies for cross-border payments in September 2022.
Now, the Russian PM has directed the concerned authorities to present draft legislation covering “the issuance, organization of issuance and circulation of digital currency in Russia in terms of regulating mining, as well as the use of digital currencies in international settlements, by December 19, 2022. Clearly, the Russian administration has made up its mind to use cryptocurrencies as a tool to fight the dominance of the US dollar.
Russia Likely To Have Its CBDC By 2023
Even as the country uses cryptocurrencies to mitigate the SWIFT ban, the primary focus remains on the CBDC. With Russia yet to start its CBDC pilot program, financial experts and developers in the country will have to pull up their socks, considering the deadline set by the PM. The PM expects to see proposals for the use of the digital ruble in the “budget process”, by December 19. The Central Bank of Russia expects to start the CBDC pilot process in 2023. With a deadline in hand, the pilot process must start as expected for Russia to have its CBDC by 2023.