The digital ruble is going abroad

In the first quarter, the Bank of Russia plans to start developing a cross-border settlement model using the digital ruble. The presentation of the Central Bank presents two models that can be taken as the basic version. True, market participants believe that the very introduction of cross-border settlements using the digital currency of central banks is a matter of the distant future and depends not only on technology, but also on the geopolitical situation.

The Bank of Russia has prepared a presentation on the digital ruble project (available to Kommersant). It describes the platform of the digital ruble, the stages of implementation that have already been completed. The next stages of the introduction of the digital ruble have been outlined (see “Kommersant” dated December 23, 2022), such as testing C2B operations (client-to-business) by pilot banks, preparing a legislative one (at the end of the year, a bill on the digital ruble was even submitted to the Duma) and regulatory framework for operations with it, as well as the launch of a pilot project for payments in real digital rubles for a limited number of clients.

But, more importantly, if earlier the prospect of cross-border transactions with digital currencies of central banks (CBDC) was mostly spoken in general terms, then specifics appeared in the new presentation of the Central Bank. The development of models of cross-border interaction is scheduled for the first quarter of this year, and even two options for possible models are given.

The first assumes that countries enter into separate bilateral agreements on the integration of digital currency platforms among themselves. In this case, the platforms of each country ensure the conversion and transfer of formats between countries according to agreed rules and standards. The second option involves connecting the country to a single integration platform, which allows, on the basis of developed common protocols and standards, to ensure payments between digital currency platforms of different countries connected to it.

According to the head of the Association of Electronic Money and Money Transfer Market Participants (AED) Viktor Dostov, the first approach is similar to correspondent relations “each with each”. “Interaction protocols are concluded between pairs of countries, allowing the transfer of value from one CBV to others, this may be a conversion protocol or currencies begin to live in parallel on each of the platforms,” he says.

In the second case, a hub is created, platforms are connected by a star, as in a payment system, and a protocol of accession is enough, he points out, noting that this allows the conversion or transparent transfer of CBSS from platform to platform.

According to Roman Prokhorov, head of the board of the Financial Innovations Association (AFI), the first scheme of cross-border interaction for settlements of the Central Central Bank reflects a simpler in terms of implementation, but less promising option for bilateral interaction between countries. The second scheme is a more “advanced” option, which actually means the organization of a supra-country payment system.

“Obviously, the implementation of cross-border settlements using the CBCC will depend not so much on the readiness of the Russian side, here our jurisdiction to promote the CBCC project is confidently in second place after the PRC, but on the readiness of our partners,” the AFI head is sure. Therefore, in his opinion, initially, obviously, a two-way interaction scheme will be implemented. He considers China to be the most likely partner at this stage, taking into account technological and political readiness. “Other schemes for the implementation of cross-border settlements on the basis of the CBSS, including the model of the supra-country payment system, will depend on the pace of development of national CBSS projects in friendly jurisdictions,” he says.

At the same time, market participants note that cross-border transactions with the Central Bank of Central Banks are a matter of a distant future. Vice-President of the Association of Banks of Russia Alexei Voylukov draws attention to the fact that the main issue is not a technical implementation, but a political one. According to him, the introduction of the digital ruble will not change or improve the situation here, so that in the foreseeable future, pilot operations can only begin with very close friendly countries if they, like us, are technically ready by that moment.

Maxim Buylov