The Bank of Russia has announced changes to the regulation of its central bank digital currency (CBDC). This will allow foreign banks to open digital ruble accounts from 1 January 2025. In the meantime, the central bank is targeting domestic use cases and doesn’t expect a full launch before that date.
Recently enacted Russian laws already permit foreign banks to hold digital rubles. However, the Central Bank currently has no regulatory framework in place for international banks. A representative of the Bank told RBC news, “When building the digital ruble platform, we considered the possibility of cross-border interaction. That is why it is already spelled out in the law. This possibility should be reflected, among other things, in the necessary by-laws. We will carry out the corresponding work as necessary.”
The new regulation would enable Russia to bypass the SWIFT payment ban, which has made it increasingly difficult to conduct foreign business since March 2022. Instead of denominating international trade transactions in dollars, many are currently in renminbi.
The SWIFT payment system will also have to compete with mBridge, a multi CBDC payment system, between China, Hong Kong, Thailand and UAE. A minimum viable product is expected to launch in the middle of next year. For years Russia has maintained close ties with China. The question is whether Russia might get involved with mBridge. If so, it could significantly increase the demand for Russia’s digital ruble.
China and India are also developing their own CBDCs. The BRICS made a formal commitment to the use of local currencies at the latest summit. This could see a much faster uptake of digital currencies for both domestic and international transactions.