Russia will initiate CBDC settlement system development in Q1 as sanctions continue.

This quarter, the country's central bank will begin examining two potential cross-border CBDC settlement models.

Reports indicate that Russia's central bank will begin developing a cross-border settlement system utilizing a central bank digital currency (CBDC) in response to ongoing sanctions imposed in response to its invasion of Ukraine.

According to a report published on January 9 by local media outlet Kommersant, Russia's central bank will examine two potential cross-border settlement models as part of its plans to move forward with the digital ruble in the first quarter of 2023.

The first proposed model involves separate bilateral agreements between various countries and Russia to integrate their CBDC systems.

Each agreement would ensure that the conversion and transfer of assets between the countries adhere to the terms of the agreement.

The second, more complex model proposes a single hub-like platform for Russia to interact with other countries, with shared protocols and standards to facilitate payments between connected nations.

The board chairman of the Financial Innovations Association (AFI), Roman Prokhorov, opined that the first model was easier to implement but less promising for bilateral interactions between nations.

The alternative option was more "advanced," and he considered implementing an initial two-way system with China as the most likely partner due to its "technological and political readiness."

In September, it was reported that Russia intended to use its digital ruble for transactions with China by 2023.

Others, however, believe that Russia's CBDC play will not be hampered by technology, but by politics.

Alexey Voylukov, vice president of the Association of Banks of Russia, stated that introducing a digital ruble will not change or improve Russia's global political situation, and trials for the CBDC platform can only be conducted with countries that are technologically prepared and friendly with the Russian government.

Previously, the Bank of Russia had stated that it planned to implement its digital ruble by 2024, with all banks and credit institutions linked to the CBDC's platform.

Since launching a full-scale invasion of Ukraine in late February 2022, when it escalated the Russo-Ukrainian conflict, Russia has faced increasing financial and trade sanctions.

Since then, it has attempted and pondered ways to circumvent the sanctions, such as the central bank considering the use of cryptocurrencies "only to support foreign trade"

In September, the Bank of Russia and the Ministry of Finance reached an agreement on a rule permitting Russians to send international payments using cryptocurrencies.

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