Russia’s Moscow – A fundamental change in how CBDCs are seen in the global financial system has been signaled by the Russian Central Bank’s announcement that it intends to classify the digital ruble, the country’s Central Bank Digital Currency (CBDC), as a “high-quality liquid asset” (HQLA). Central banks have traditionally regarded assets like fiat money, bank reserves, and government bonds issued by countries with strong credit ratings as HQLAs.
However, up until recently, central banks and regulatory organizations have mostly focused their HQLA classifications on traditional fiat currencies rather than CBDCs. According to Tass and a statement from the Russian Central Bank, the Russian Central Bank has developed proposed adjustments to liquidity calculation methodology that will incorporate “digital rubles into HQLA calculations.”
Market participants have until September 23 to offer comments on the suggested rules. Commercial banks in Russia will be compelled to use these procedures starting on October 1, 2024, if accepted without material changes.
This development indicates that banks will probably have to account for CBDC holdings in the future as part of their financial reporting procedures.
Earlier this month, the digital ruble project’s pilot phase began. More than a dozen domestic banks participated, and 600 people from 11 cities used the digital currency to conduct “real-world” transactions.
Commercial banks in Russia, however, seem to have conflicting opinions about the virtual ruble. This most recent regulation change can increase doubts already present in the banking industry.
The potential for CBDCs to aid the transformation of cross-border payments was emphasized by economist Ruth Wandhöfer in a 2022 article for the Official Monetary and Financial Institutions Forum. According to Wandhöfer, such changes could lessen the need for expensive commercial lending from correspondent banks and replace them with transactions involving high-quality liquid assets backed by reserve money from central banks. This would make it possible for banks to trade funds in other currencies that are backed by central bank reserves without using local real-time gross settlement systems.
On these ideas, the Russian Central Bank’s position is still up in the air. However, it is clear that the bank is eager to use its virtual ruble as soon as possible in cross-border scenarios.
Notably, several nations—including longtime allies of Moscow like Belarus and Kazakhstan—have started their own digital currency initiatives with the specific goal of using them in international trade. Between 2025 and 2027, the Russian Central Bank intends to roll out its digital ruble nationally.
The development of the Russian digital ruble is in line with initiatives made by other BRICS countries like China and Brazil, both of which are moving forward with their own digital currency programs. Beijing in particular has expressed cautious optimism about the international use of its digital currency as the BRICS countries and its allies look to wean their trade networks off of the dollar.
This development takes place in conjunction with the BRICS summit, which will be held from August 22 to August 24. Experts predict that at this summit, participants will debate the creation of “working groups” to build a shared digital currency.