Key Takeaways:
To circumvent Western sanctions, Moscow has announced plans to launch regulated cryptocurrency exchange trials for cross-border payments starting September 1. The government believes the move will ease payment difficulties for exporters, who have faced restrictions since the war with Ukraine began more than two years ago.
Russia Will Trial International Payments Using Cryptocurrencies Starting September 1
According to anonymous sources familiar with the plan, Russia will use its National Payment Card System (NCPS) during the trial to facilitate the exchange between rubles and cryptocurrencies for international transactions.
The network was chosen for the task due to its existing functionalities, such as the interbank settlement and clearing, and full regulation by the Central Bank of Russia.
NCPS currently handles all ruble-denominated interbank settlements in the country. The framework will be upgraded to support crypto payments during the trial, which will be under the supervision of the Russian central bank.
If successful, this experiment could provide the country with an alternative payment system for international transactions.
Russian businesses have been struggling to maintain their overseas operations due to the extensive financial sanctions imposed by the United States and the European Union following the invasion of Ukraine in 2022.
Payment constraints have made it difficult to buy foreign supplies and have left exporters struggling to get reimbursed.
In June, the US announced new sanctions targetting Russia-friendly foreign banks. Given that global institutions rely on their access to the US dollar, the fear of a sanction forced many companies to cut ties with Moscow.
Recently, several Chinese banks stopped yuan payments to Russia. This came despite the Chinese yuan playing a prominent role in the country’s current-day economy. Meanwhile, Moscow can’t rely on Western currencies like the dollar or euro after it was booted off the SWIFT international banking system.
Russia Takes U-Turn On Anti-Crypto Stance With De-Dollarization Strategy
Russia now embracing digital currencies is a significant twist in the tale. Previously, the country’s central bank pushed for a blanket ban on cryptocurrencies and related activities, citing concerns over financial stability and illicit activities.
The legal turnaround came earlier this month when President Vladimir Putin legalized the creation of a cross-border cryptocurrency framework. He also signed another bill permitting crypto mining in the country.
Russia is expected to allow the Moscow Stock Exchange and St. Petersburg Currency Exchange to create crypto platforms starting next year. However, Finance Minister Anton Siluanov said at a recent forum that they haven’t found a solution yet on how to get it done and that it looks less likely.
The upcoming central bank-led international crypto settlement trials are part of a broader effort by the BRICS nations – Brazil, Russia, India, China, and South Africa – to reduce their reliance on the US dollar for international trade, also known as “de-dollarization”.
The alliance has been actively exploring alternative payment systems, including the potential use of cryptocurrencies, to free their economies from Washington’s influence.
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