The digital ruble, the central bank digital currency (CBDC) project of the Bank of Russia, is slated for release in the next year.
But, the country is already making plans for what it intends to do with the currency, including using it for making payments to its key ally i.e. China.
Authorities in Moscow are hoping that other countries will also be ready to adopt the digital currency for trading purposes, thereby allowing Russia to circumvent the sanctions imposed on it due to the Russian invasion.
The digital ruble
The Central Bank of Russia is preparing to introduce settlements with the digital reincarnation of the country’s fiat currency, which is currently in its testing phase.
Dubbed the digital ruble, the currency is scheduled for a release in 2023 and a prominent member of the State Duma disclosed that they want to use it in payments with their trading partner, China.
The financial restrictions that have been introduced against the country due to its military invasion of Ukraine have meant that its access to the global financial system has been limited.
Therefore, the country has had to look for alternate means of payment for conducting foreign trade transactions.
Other than cryptocurrencies, one of the options that Moscow is considering is that of the digital ruble in order to bypass the sanctions.
Anatoly Aksakov, the head of the Financial Market Committee of the lower house of the Russian parliament, said that the discussion of the digital ruble, digital financial assets and crypto were gaining traction in society.
He said that this was because of the sanctions being imposed by Western countries, which were making international settlements, such as bank transfers, immensely difficult.
According to the high-ranking official, taking this digital direction is essential because it can circumvent the systems that are under the control of unfriendly countries through financial flows.
He also added that the next step they would take after introducing their central bank digital currency (CBDC) would be to use it for making international settlements with China.
He went on to say that other countries would also follow in their footsteps going forward, which will help in breaking the control of the US over the global financial system.
Cooperation with China
Since Russia no longer has access to markets in the West, including that for energy exports, the importance of cooperation with China has become vital for the country.
There has been increasing trade between the two countries and Russian companies have gone as far as even issuing debt in the form of Chinese yuan.
Currently, even Beijing is also in the testing phase of its digital yuan, which is called e-CNY and China also intends on using its central bank digital currency (CBDC) for international payments.
In order to ensure it can do so, Russia is also working on developing comprehensive regulations for cryptocurrencies in the next few months.
They already have a bill called ‘On Digital Currency’, which will help in expanding the framework provided by another law called ‘On Digital Financial Assets’ implemented last year.