Russia has revealed plans to allow the use of cryptocurrency for international settlements. The country’s Central Bank is already drafting a law that will clear the path for using digital assets to execute external payments.
The news came during an event attended by representatives of the New People party. Speaking at the venue, the Chairman of the Central Bank of Russia, Elvira Nabiullina, acknowledged that the regulator was against the use of cryptocurrency within the state. Nevertheless, it maintains openness to using it for international settlements.
As such, independent Russian institutions are likely to be established to spearhead the country’s crypto mining and transfer services to foreign organizations. Based on the report, these groups will also be joining hands with other forms of digital finance.
Currently, consultations between the Central Bank and the Russian government are underway to determine which institutions will be mandated to engage in mining and crypto-related transactions with foreign countries. Thus far, the report notes, “state-owned institutions will take first priority” on the metrics of entities entrusted with the task. Besides state-owned organizations, private enterprises will also be considered, although not at the moment.
Russia Works To Develop Its CBDC, Uses Chinese Yuan For Settlements With Asia, Africa, and Latin America
In a different but related story, Russia has been doubling down on efforts to develop its Central Bank Digital Currency (CBDC). Accordingly, Russian banks are expected to begin testing the digital ruble CBDC on customers after the adoption of a regulatory structure in late April or early May.
Moreover, the country led by President Vladimir Putin has been advocating for the internationalization of the Chinese Yuan. Putin made a recent comment that almost two-thirds of the trade between Russia and China takes place using their two currencies, the Ruble and Yuan, respectively.
Beyond that, the Russian president also expressed his country’s support for the use of the Chinese Yuan in payments between Russia and select countries in continents like Asia, Africa, and Latin America.
Implications For Currencies Internationalization
The transition towards digital currencies and the internationalization of currencies, like the Chinese Yuan, are key developments. However, they do not come without implications for the global financial system. For starters, using digital currencies to complete international payments could not only expedite transactions but also make them cheaper and safer. Nevertheless, concerns about cryptocurrencies’ volatility cannot be overlooked.
Additionally, there are also concerns about the potential for international settlements to become the new hub for illegal activities. The use of Central Bank Digital Currencies also raises concerns about privacy and surveillance matters.
Even in the face of these concerns, however, the transition to digital currencies for international payments appears to be the new hype in the financial space. Still, it remains to be seen how quickly and efficiently this transition will take effect. Another interesting aspect will be the impact of this shift on the global financial system.
A New Trend Among Countries To Explore Crypto Use
The shift toward digital currencies in settling international payments is not new. Besides Russia, many other countries across the globe have already taken to it as part of their commitment to reducing their reliance on the United States Dollar for trade.
Among them, countries like the United Arab Emirates (UAE) and India are discussing using Indian Rupees to trade commodities other than oil. Countries like El Salvador and the Central African Republic (CAR) have made crypto legal, active, and recognized for trade.
Passively, other nations also accept cryptocurrency as legal tender. Several others are already developing legislation that will oversee the use of Bitcoin (BTC) and other crypto tokens. As a result, the move has cleared the path for crypto to serve in settling transactions, and no CBDCs are the new target.
Russia is steadily moving forward with its intention to use crypto for global settlements. With this, chances are high that other countries will soon follow suit. Such a move could revolutionize how international trade happens and deliver a more decentralized and secure financial ecosystem in the long run.
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