Starting September 1, Russia will use cryptocurrencies for international payments, aiming to find alternatives to bypass economic sanctions imposed by Western countries.
Faced with challenges in traditional payment systems, Russian authorities are exploring alternative methods to facilitate international transactions. Before the Ukraine conflict in 2022, the Central Bank of Russia had advocated for a complete ban on cryptocurrencies. However, their use has become more prevalent after Russia was excluded from the SWIFT payment system.
On August 8, Russian President Vladimir Putin signed legislation legalizing the experimental use of cryptocurrencies in international payments and Forex transactions. The Central Bank of Russia will oversee the process as the country begins using cryptocurrencies for international payments on Sept. 1.
While the Central Bank governor and the finance minister have previously indicated efforts to legalize cryptocurrencies, details on how they will be used in international trade and their security framework remain unclear.
Russia’s national payment system key to cryptocurrency trial
Russia’s National Payment Card System, an operational and payment clearing house for processing bank card transactions within Russia, will play a crucial role in the trial process for transitioning to cryptocurrencies in international trade. The Central Bank of Russia has full control over the system, which is expected to be integral to this effort.
Stablecoins, which are cryptocurrencies linked to fiat currencies like the US dollar or the Chinese yuan, are anticipated to be used in Russia’s international payments.
On July 10, the Central Bank of Russia announced that it was evaluating a mechanism to establish rules and regulate the circulation of stablecoins within the country.
For Russia’s cryptocurrency initiative to succeed in international trade, support from BRICS nations is considered essential. Brazil, South Africa, and India have indicated that they are working on this issue, though their full commitment remains to be seen.
A report by the Russian Transstroy Bank highlighted the potential benefits of using cryptocurrencies in international trade but also pointed out challenges, including restrictions in certain countries, technical complexities, and value fluctuations.
Digital ruble trials continue
The Central Bank of Russia began trials for the digital ruble last year, intending to integrate it with the cryptocurrency transition in international trade.
Russia plans to use both cryptocurrencies and the digital ruble in trade with China, its largest trading partner, taking inspiration from China’s digital yuan. Anatoly Aksakov, head of the Financial Market Committee and member of the State Duma, stated in June that both Russia and China have significant experience with digital currencies and that technological advancements in this area are progressing rapidly. Expanding the use of digital currencies with Belarus is also under consideration.
The digital ruble has been in trial since August 2023, with about 30 companies and 11 cities currently using the currency. The Moscow Metro and some Lukoil gas stations have started accepting the digital ruble as a payment method.
President Putin has emphasized the importance of widespread adoption of the digital ruble. However, experts note that successful domestic trials are essential before the digital currency can be used in international trade.