Russian Prime Minister Sets 2022 Deadline for Digital Currency as Yuan Hits 26% in FX – Ledger Insights
Yesterday Russian Prime Minister Mikhail Mishustin decreed a December 2022 deadline for clarifications on the use of digital assets and digital currencies for cross-border payments. The news came as the Chinese yuan accounted for 26% of Russia’s foreign exchange transactions in August, although the reason given was that the Chinese currency was a good substitute for the US dollar.
The government decrees released yesterday covered the tokenization of real-world assets for settlement, cryptocurrencies, as well as a digital ruble or central bank digital currency (CBDC).
As previously reported, the Ministry of Finance is in talks with the Central Bank of Russia on the potential use of cryptocurrencies for cross-border trade payments to address sanctions. There is also interest in creating commodity-based token assets – under Russia’s Digital Financial Assets (DFA) framework – to be used for settlement.
In yesterday’s government decree, by December 1, the Ministry of Finance and the central bank must submit agreed proposals for the DFAs “to contribute to the uninterrupted payment for the supply of goods from abroad and to export”.
Moving on to cryptocurrencies, by December 19, the Prime Minister expects to see a draft law covering “issuance, organization of issuance and circulation of digital currency in Russia in terms of regulation of mining, as well as the use of digital currencies in international settlements”.
And finally, on the same date, he wants to see proposals for the digital ruble to be used in the “budget process”. This could mean social security and social benefits. Last month, the central bank provided a timetable for a CBDC, with the pilots will start in 2023.
State corporation Rostec will use tokenized assets for settlement
In June, Rostec, the state-owned defense conglomerate, said it had developed a solution on the CELLS blockchain platform which supports multi-currency payments to bypass the SWIFT cross-border payment network.
Last week, Anna Sharipova, an executive at Rostec, mentioned the use of digital assets – tokenized real-world assets – as a settlement mechanism for importers and exporters facing sanctions. She said she was working on localized pilots, which would have restrictions and may initially not include DFAs, which the central bank heavily regulates.
Russians switch to Chinese Yuan
Meanwhile, last week the Central Bank of Russia announced that the Chinese yuan accounted for 26% of foreign exchange volume in August. Rather than trading with China, the logic is to peg the Chinese currency to the dollar. The Russians therefore use the yuan as a substitute for the dollar.
He explained the change (using Google Translate): “Buying RMB allows professional market participants to manage a position in hostile currencies – primarily US dollars, as there is a strong correlation between CNY/RUB rates and USD/RUB On the long-term horizon, these currency pairs move in the same direction, insignificant differences in the movement of rates are observed only in certain short-term periods.
While the Russian CBDC has not yet launched its pilot project, it should be noted that China is involved in a multi-CBDC cross-border payments pilot project, the Multi-CBDC Bridge Project, with countries considered “friends ” by Russia: Hong Kong, Thailand and the United Arab Emirates.