(Kitco News) - Russia has revealed plans to use its forthcoming central bank digital currency (CBDC), the digital rouble, to conduct mutual settlements with China beginning in 2023, according to a recent report published in Reuters.
The move comes as Russia and China seek to reduce Washington’s global financial hegemony. The digital rouble is currently in the testing phase with banks and is expected to be ready in the first quarter of next year.
Russia has been working on its CBDC for the past couple of years as it looks to modernize its financial system, speed up payments and get out in front of the growing popularity of Bitcoin and cryptocurrencies.
The sanctions placed on Russia as a result of its invasion of Ukraine have quickened this process, but the digital rouble was already in testing with banks prior to the sanctions being implemented.
Due to the increasingly hostile global financial landscape, Russia has intensified its search for an alternative means of conducting transactions, according to Anatoly Aksakov, head of the finance committee in Russia’s lower house of parliament.
“The topic of digital financial assets, the digital rouble and cryptocurrencies is currently intensifying in society, as Western countries are imposing sanctions and creating problems for bank transfers, including in international settlements,” Aksakov said. The introduction of digital currencies has allowed financial flows to bypass systems controlled by unfriendly countries, he added.
The next step in testing the digital rouble will be to launch it for mutual settlements with China, which has already begun expanding the pilot test for its digital yuan, the e-CNY.
“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,” said Aksakov.
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The collective shunning of Russia by Western nations in response to its activities in Ukraine has pushed Moscow into a closer relationship with Beijing, leading to increased trade and the issuance of Yuan-denominated debt by Russian companies.
In the third week of September, the U.S. Treasury Department added 22 individuals and two Russia-based entities to the sanction list, further highlighting the need for Russia to develop alternative payment options.
According to the Bank of Russia’s latest monetary policy update, all banks and credit institutions will begin to be connected to the digital rouble platform in 2024.
