In the midst of ongoing sanctions as a result of its invasion of Ukraine, the Central Bank of Russia is reportedly ready to start creating a cross-border settlement system utilizing a central bank digital currency, or CBDC.
The Bank of Russia previously stated that it intended to introduce the digital ruble by 2024, with all banks and financial institutions linked to the CBDC platform.
Since Russia's full-scale invasion of Ukraine in late February 2022, which escalated the Russo-Ukrainian war, the country has been subject to increasing economic and financial sanctions.
According to a Jan. 9 report by local media outlet Kommersant, preparations to move forward with Russia's digital ruble are planned in the first quarter of 2023, with Russia's central bank studying two prospective cross-border settlement models.
The first proposed model calls for other countries to enter into bilateral agreements with Russia to integrate their CBDC systems.
Each agreement would be formed to ensure that the conversion and transfer of assets between countries follow the terms of the agreements.
The second, more difficult concept envisions a single hub-like platform for Russia to engage with other countries, with the connected countries sharing similar protocols and standards to simplify payments.
The first model, according to Roman Prokhorov, the executive director of the Financial Innovations Association (AFI), was easier to execute but less effective for cross-national contacts.
The alternative was deemed to be more "advanced," and he thought a two-way system might be established first, with China being the most likely partner given its "technological and political readiness."
A rule permitting Russians to transfer cross-border payments using cryptocurrency was agreed upon by the Bank of Russia and the Ministry of Finance in September.
According to reports from September, Russia intends to settle financial transactions with China using the digital currency by the end of 2023. Others, however, think politics, not technology, will constrain Russia's CBDC effort.
According to Alexey Voylukov, vice president of the Association of Banks of Russia, the introduction of a digital ruble won't alter or improve the political climate in the world for Russia, and tests of the CBDC platform can only be conducted with nations that are friendly toward the Russian government and have the necessary technological infrastructure.
Since then, it has experimented with and thought about ways to get over the restrictions, with the central bank considering using cryptocurrencies in the nation "only to support foreign trade."
