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Russia’s Central Bank Encourages Crypto to Mitigate Sanctions Impact

Last Updated July 4, 2024 12:56 PM
Teuta Franjkovic
Last Updated July 4, 2024 12:56 PM

Key Takeaways

  • Russia’s central bank recommends businesses utilize cryptos to navigate Western sanctions and facilitate international payments.
  • The Bank of Russia has softened its stance on cryptocurrencies, allowing their use in international transactions.
  • BRICS nations were developing a blockchain-based payment system to enhance trade and reduce reliance on the USD.

Russia’s central bank has advised national businesses  to explore various payment solutions, including cryptocurrencies and digital assets, for managing transactions with foreign partners amid Western sanctions.

Bank of Russia Governor Elvira Nabiullina noted  the central bank’s more lenient stance on using cryptocurrencies for international payments. She also mentioned ongoing efforts to develop alternative global payment systems, such as the BRICS Bridge.

Bank of Russia Recommends Crypto to Counter Sanctions

Russia’s central bank, the Bank of Russia, has recommended that businesses adopt “multiple choice solutions,” including cryptocurrencies and other digital assets, to manage payments with foreign partners and counteract the effects of Western sanctions following the Ukraine conflict.

Nabiullina highlighted that payment issues are a significant challenge for the Russian economy. Speaking at a financial conference in St. Petersburg, she emphasized that new financial technologies provide solutions that were previously unavailable. The central bank is now considering various alternatives to facilitate international transactions, reflecting a more flexible approach towards cryptocurrencies and digital assets.

According to  Nabiullina:

“New financial technology creates opportunities for schemes which did not exist before. This is why we softened our stance on the use of cryptocurrencies in international payments, allowing the use of digital assets in such payments.”

Nabiullina went on to emphasize the adaptability and resourcefulness of businesses, noting that various alternatives are being explored. She remarked on how businesses have become highly flexible and enterprising, often finding their own solutions to payment challenges without always informing the central bank.

BRICS Nations Developing Blockchain-Based Payment System to Enhance Trade and Reduce Dollar Dependence

Nabiullina also addressed international cooperation, mentioning that BRICS countries are negotiating to create the BRICS Bridge payments system. This multilateral digital settlement and payment platform is designed to link the financial systems of BRICS member countries and enhance mutual trade. She noted, however, that these discussions are intricate and that developing such a system will require time.
The BRICS group, originally composed of Brazil, Russia, India, China, and South Africa, has recently expanded to include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.
Recently, a Russian aide to the Kremlin has disclosed  that the BRICS intergovernmental group is developing a blockchain-based payment system for international trade settlements.

While specific details of the project are not yet available, this initiative could mark a significant advancement for BRICS in its efforts to de-dollarize and establish a stronger presence in global markets.

The newly expanded BRICS group, aiming to become a major international trading and economic bloc comparable to the European Union, is working on creating an independent payment system leveraging blockchain technology and digital assets.

Russia’s Trade Partnerships Strain Under New Sanctions

New Western sanctions have specifically targeted major Russian financial entities, including the Moscow Stock Exchange and Russia’s alternative to the SWIFT global payments system.

The US Treasury Department has urged Congress last year  to enact legislation granting it the power to block transactions involving U.S. dollar-denominated stablecoins, such as Tether.

Last week, the department blacklisted a Moscow company that had collaborated with a sanctioned Russian bank to facilitate tether-based payments.

The Russian central banker now noted  that Russia’s trade partners are under “tremendous pressure” but expressed optimism that a new global payments system, independent of Western institutions, would eventually emerge. She emphasized that many countries feel vulnerable relying on a single international payment system and are seeking alternatives.

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