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Monday, March 20, 2023

Idea to Use Digital Ruble as Reserve Currency Circulated in Sanctioned Russia

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Idea to Use Digital Ruble as Reserve Currency Circulated in Sanctioned Russia – The State Duma, Russia’s lower house of parliament, has proposed making the digital ruble a reserve currency. Meanwhile, fears have been expressed in the West that the new iteration of the Russian fiat may be used to circumvent the country’s isolation due to sanctions.

Faced with escalating Western sanctions, Russian officials have been considering ways to get around the limits that have already reduced Russia’s access to its foreign reserves and the global financial system.

According to Russian media and Forklog, Sergei Mironov, the leader of the opposition ‘A Just Russia’ faction in the Duma, encouraged the federal government, the central bank, and the operational headquarters on fighting sanctions to implement the digital ruble.

Also Read: Bank of Russia Allows Sberbank to Issue Digital Financial Assets

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The initiative’s goal, according to the high-ranking MP, is to issue the central bank digital currency (CBDC) for specified purposes such as housing and other construction projects, as well as production and transportation infrastructure development.

“The digital ruble should become Russia’s full-fledged investment and reserve currency,” Mironov explained. The deputy believes that the CBDC will offer much-needed funds to the Russian economy without raising inflation. He also stated that the digital rubles could not be deposited abroad or used for non-intended reasons.

Western allies are concerned that Russia would utilize cryptocurrencies, such as the digital ruble, to dodge sanctions imposed as a result of its invasion of Ukraine, and have made moves to block loopholes.

Another politician, Alexander Yakubovsky, a member of the crypto regulatory working group, recently stated that Russia is interested in using digital currencies to regain access to global finance.

The Central Bank of Russia (CBR), a staunch opponent of cryptocurrency legalization, has been working on the digital ruble project. Three years ago, the monetary authority began considering a CBDC.

In October 2020, the bank presented a consultation document, and in April 2021, it released a digital ruble concept defining its main architecture.

Also Read: Luno Launches Venture Fund to Invest in Over 200 Crypto and Fintech Startups per Year

The CBR announced the first complete transactions between individual wallets in mid-February, kicking off testing of the digital ruble platform. Dozen of Russian banks will take part in the experiments, which are slated to last until 2022. The Bank of Russia claims that its digital money will open new doors for Russian citizens, enterprises, and the government.

The Russian Federation has similarly attempted to reduce its reliance on the dollar. Last October, Russia’s Ministry of Foreign Affairs warned that alternative currencies and even digital assets could eventually replace the dollar in Russia’s currency reserves and trade settlements.

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