Russia Plans to Use Digital Rubles in Settlement with China

Russia Plans to Use Digital Rubles in Settlement with China        

Russia is planning to use its digital ruble for trade settlements with China. The launch of the digital ruble has been slated for next year. Moscow is also hopeful that other nations will adopt the Russian digital currency for international trade settlements, which will allow the country to circumvent sanctions imposed over the Ukraine war. 

Digital Ruble for Payments in Trade with China

The Central Bank of Russia is set to launch cross-border settlements with the digital ruble. The new avatar of the Russian fiat currency is now being tested for launch in early 2023. The sanctioned nation wants to use it in payments with China, which has become Russia’s main trading partner. Informed sources were revealed by a prominent member of the Lower House of the Russian Parliament.

The limited access to the global financial system due to financial restrictions imposed in response to its military invasion of Ukraine has compelled Russia to look for alternative means of payment for foreign trade settlements. The digital ruble is one of the options besides cryptocurrency that Moscow is considering in its efforts to bypass the sanctions.

"The topic of digital financial assets, the digital ruble, and cryptocurrencies are currently intensifying in society as Western countries are imposing sanctions and creating problems for bank transfers, including in international settlements," the Head of the Financial Market Committee at the State Duma, Anatoly Aksakov, recently told the Parlamentskaya Gazeta.

The lawmaker elaborated that digital currencies hold the key because financial flows can circumvent systems controlled by unfriendly nations. He added the next step for the Central Bank Digital Currency (CBDC), issued by the Bank of Russia, would be to introduce it in mutual settlements with China. Reuters' report has also quoted Aksakov:

"If we launch this, then other countries will begin to actively use it going forward, and America’s control over the global financial system will effectively end."

The loss of markets to the West, including for energy exports, has increased the importance of cooperation with China. Trade between the two countries has expanded significantly, and Russian companies have started issuing debt in the Chinese yuan. Beijing is currently conducting trials of its digital currency, the e-CNY, and plans to use it in cross-border settlements, too.

Russia is preparing to adopt comprehensive regulations for its crypto market in the coming months, including a new bill "On Digital Currency" that will expand the legal framework established last year by the law "On Digital Financial Assets." Russian regulators are already developing a mechanism for international crypto payments, and the respective draft provisions have been agreed upon by the Central Bank and the Finance Ministry.