The Central Bank of Russia (CBR) has outlined two potential models for developing a central bank digital currency (CBDC) for international payments. According to a presentation seen by the business newspaper Kommersant, the central bank will explore bilateral interlinking with other domestic CBDCs or a shared platform that supports multiple CBDCs, starting in Q1 2023.
In 2021 the Bank for International Settlements (BIS) published a report on the potential for using CBDC for cross border payments, or multi-CBDC (M-CBDC), outlining three models. The models that the CBR plans to use represent two of them. There are already several cross border CBDC trials, with the most advanced being MBridge involving the BIS Innovation Hub, and the central banks of China, Hong Kong, Thailand and the UAE.
The leader of Russia’s Financial Innovation Association told Kommersant that China is the most likely first partner in the initiative, because of technological and political readiness.
Alexei Voylukov, Vice President of the Association of Banks of Russia, said that a digital ruble was unlikely to improve Russia’s cross border payment issues in the immediate future because pilots can only happen with friendly countries that are technically ready. In other words, the challenge being faced by Russia relates to sanctions and unfriendly countries. Jurisdictions such as China are not imposing sanctions, so payments are not such a big challenge there. Hence a digital ruble won’t make a huge difference.
The fact that the central bank issued a report is no surprise as the Russian Prime Minister set a deadline of the end of December to clarify the use of digital currency for cross border payments. Meanwhile, in November, the CBR launched a broader consultation on digital assets and tokenization, not including cryptocurrencies.