Urgent: A new Russian weapon to circumvent sanctions and attack the dollar…a new type of ruble

The US Treasury Department’s waiver allowing Russia to transfer foreign bond payments despite sanctions ended today. This circumstance will very certainly put Moscow in default.

In April, Russia made the last payment in dollars. She made her final remaining euro payment a few days earlier, before becoming unable to pay on May 27.

As of today, Russia will be unable to make payments in US dollars and will be banned in the Eurozone.

Russia has been barred from global payment markets, including the SWIFT system, and more than 500 billion euros in foreign assets have been blocked as a result of sanctions placed on it since the February 24 invasion of Ukraine.

The state has become increasingly financially challenged over time and is currently evaluating all measures to protect its economy. One of these alternatives is to create a “digital ruble.”

What exactly is the digital ruble? To begin with, Russia was not the first to create a digital currency to modernize its financial system.

The Bahamas was the first in this category, launching its national digital currency in 2020. Nigeria created e-Nyara, a digital currency used for in-store purchases and money transfers, in 2021.

In the Eastern Caribbean, Antigua and Barbuda, Dominica, Granada, Monserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines have all created their digital currencies. This year, Jamaica also plans to introduce its own digital money.

The European Central Bank (ECB) has begun a two-year pilot project to introduce a digital euro in October 2021. Sweden is likewise experimenting with the e-krona.

In addition, some of the world’s biggest economies plan to take measures in this direction. India intends to introduce a digital rupee in 2022-2023. China, on the other hand, experimented with the digital yuan during the 2022 Beijing Winter Olympics.

The country’s digital currencies are established by the country’s central bank, which also generates digital currencies and accounts that are guaranteed by the government. Cryptocurrencies enable countries to benefit from current technology such as digital currencies while maintaining control over the financial system.

When will Russia’s digital money be available? Elvira Nabiullina, Governor of the Central Bank of Russia, declared that the establishment of a digital currency is a priority for the bank. “We produced a prototype in a very short period… We are currently testing it with banks and will begin progressively implementing it next year “In April, Nabiullina made a brief statement to the Russian parliament.

The Bank revealed today in a statement that pilot projects using the digital ruble with real clients and genuine trades will begin sooner than expected, with the launch date set for April 2023. By next year, Moscow aims to be able to conduct foreign payments using digital currency.

How might Russia benefit from the digital ruble? The digital ruble may enable Russia, which has been shut off from the international banking system due to sanctions, to continue making internal and international payments. Russia’s capacity to make international payments in digital rubles is mostly dependent on nations’ willingness to accept their currency without first converting it into dollars.

There are concerns that Russia may utilize the digital ruble to steal Bitcoin and compensate for money lost due to sanctions by employing password-cracking tactics such as ransomware.

However, Western nations are more concerned about Russia’s success in developing its digital currency. If the digital ruble holds, Western sanctions will lessen, Moscow will become more powerful, and one of the instruments available to the West against the Kremlin will be limited.

Russia, on the other hand, appears to be considering legalizing digital currencies.

On May 18, Russian Minister of Industry and Trade Denis Muratov claimed that his government would welcome cryptocurrencies in some form or another sooner or later. This might signal a significant turnaround for Russia, which had previously voiced worry that digital currencies could be used to launder money and assist terrorist organizations.

Cryptocurrencies, as an alternative payment mechanism, can assist Russia in bypassing the traditional market obstacles imposed by Western countries. The use of digital currencies in domestic and international transfers might also help Russia de-escalate domestic tensions by shielding Russian residents from the direct impact of Western sanctions.

According to recent Russian official statistics, which have not been independently corroborated, Russians hold more than €200 billion in cryptocurrencies. However, it remains to be seen how eager Putin will be to surrender power and accept a decentralized financial system as opposed to his leadership style.