Russia to Develop CBDC Settlement System

This next quarter, the central bank in Russia will start looking into two different potential cross-border CBDC settlement models.

There are continuous sanctions against Russia due to its invasion of Ukraine. Yet, reports indicate that Russia's central bank is about to begin building a cross-border settlement system using a central bank digital currency (CBDC).

According to a report published on 9 January by media outlet Kommersant, the digital rubble plans are expected to progress in the first quarter of 2023. Russia's central bank will study two possible cross-border settlement models before moving forward.

CBDC Russia future: Bilateral agreements or hub-based platforms

In the proposed plan’s first version, different countries will integrate their CBDC systems by entering into separate bilateral agreements with Russia.

Each agreement would be crafted to ensure that asset conversion and transfer between the nations would be compliant with the rules outlined in the other agreements.

The second, more complicated approach suggests establishing a single hub-like platform on which Russia and other countries can engage, sharing common protocols and standards to make it easier for connected countries to make payments to one another.

Roman Prokhorov, the Financial Innovations Association (AFI) board of directors' head, expressed his opinion that the first model was less promising for bilateral interactions between countries, but was easier to implement.

While the first model was simpler to implement, the second was more complex. The other choice was deemed more "advanced," and its proponent evaluated the possibility of implementing an initial two-way system.

He viewed China as the most likely partner in this scenario due to the country's "technical and political readiness". According to reports from September, Russia's plans to use digital currency for settlements with China may only occur sometime in 2023. Others, however, believe that technological limitations rather than political ones will support the CBDC Russia proposes.

CBDC Russia will not improve political situation - claim

Alexey Volkov, the vice president of the Association of Banks of Russia, stated that the introduction of a digital ruble will not change or improve the global political situation of the country and that trials for the Russia CBDC platform can only be undertaken with countries that are friendly with the Russian government and are technologically ready.