Launching a new payment system
Rosbank, a major Russian bank, has started operation of a cross-border payment system using crypto assets (virtual currency) as the first major bank in the country. This is reported by the Russian business newspaper Vedomosti.
According to Rosbank, the bank has already conducted transactions with corporate and individual customers on a trial basis, and technical support for the payment system has been provided by B-crypto, a Russian fintech company specializing in cross-border cryptocurrency payment services. ” is provided. The virtual currency used for settlement has not been disclosed.
The introduction of the new system will allow Rosbank’s customers to use cryptocurrencies to pay for imported goods and services. Users of the service must complete the Know Your Customer (KYC) procedures of Rosbank and B-crypto and be approved.
The flow of system usage is as follows:
- A Russian company and a foreign trader will sign a contract stipulating cryptocurrency settlement, and the foreign trader will issue an invoice with details and a wallet address.
- A Russian company and B-Crypto signed a contract, and the import company deposited the equivalent amount of the virtual currency in the account of the Rosbank in legal currency.
- Rosbank remits to B-Crypto, B-Crypto converts to virtual currency “in a friendly country”, and then remits to the address of the overseas company
Legal Position of Virtual Currencies in Russia
According to Vedomosti, Russia has yet to establish a legal framework for cryptocurrencies, and domestic payments using cryptocurrencies are prohibited. On the other hand, it is allowed to be used for payments outside Russia’s financial infrastructure and for cross-border transactions.
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Late last month, Russia withdrew plans to establish a state-owned cryptocurrency exchange after opposition from the Ministry of Finance. Instead, it is considering introducing rules to regulate private cryptocurrency trading platforms.
Alexei Guznov, Deputy Governor of the Central Bank of Russia, said that cryptocurrency trading platforms in Russia could function more as an entity coordinating interactions between exporters and importers in the context of international transactions, rather than regular exchanges. said to be expensive. One example is the role of supporting payments for imported goods by Russian companies.
Central banks are likely to be responsible for regulating exchanges, said Deputy Anatoly Aksakov, chairman of the Financial Markets Committee.
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lack of liquidity
Alexey Voyrokov, Deputy Chairman of the Russian Bankers Association, said that cross-border payments using cryptocurrencies lack the level of liquidity required by large corporations, and as a result, small banks are generally the primary focus for small-value payments for medium-sized companies. It is pointed out that there are many cases where it is provided to customers, and that it is not adopted by major banks. It also questioned its profitability.
He added that he did not expect much demand due to the risk of the payment service and the frequency of fiat-to-crypto exchanges.
But Rosbank’s new cross-border payment offering could also be seen as a way to circumvent U.S. economic sanctions against Russia, said Edward Davidoff, a lawyer at Emet Law Firm. .
Russia’s trend toward building an alternative payment system
In September last year, Russia’s deputy finance minister announced plans to issue stablecoins backed by assets such as gold. It was reported that they are collaborating with several friendly countries to build a platform that can use stablecoins as an alternative payment method to the US dollar and the euro.
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And at the end of March this year, Russia’s Deputy Speaker of the House of Representatives Alexander Babakov said that India, Russia and China should build new financial ties based on a new monetary system for a multipolar world. He also hinted at the possibility of issuing a Central Bank Digital Currency (CBDC).
Russia’s Central Bank Governor Elvira Nabiullina said in the same month that the CBDC “digital ruble” is expected to start live trading in 2023. He said he has in mind the use of the digital ruble for international payments as well.
The Central Bank of Russia will start a pilot program for the digital ruble from February 2022.
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