The recent development in the Russian parliament, Duma indicates the approval of legislation which permits domestic firms, the use of Digital Financial assets (DFAs) like bank issued Stablecoins and nation’s own digital currency for example digital Ruble to trade in the international market between a Resident and a Non resident however it is to be highlighted that the legislation excludes the use of the most popular cryptocurrency - Bitcoin to be used as means for trade because of its high volatility and Price fluctuations.
According to Anatoly Aksakov, Chairman of the Committee following the bill the term “Digital Financial Assets” is now being redefined to include Digital fiats like Digital ruble, bank issued stablecoins, digital securities and digital commodities.
Russia despite a hesitance towards Cryptocurrency and DFAs looks at it as a means to tackle its ongoing economic instability caused by the Ukrainian War and Western Sanctions.
Russia’s adoption of cryptocurrency and DFAs as modes of international payments helps them to counter the ongoing US sanctions.
It helps Russia to seamlessly trade with friendly nations and bypass the geopolitical tensions and gain economic stability.
The use of DFAs is also synchronized with Russia's increasing tilt towards the renminbi for its cross-border transactions which reflects the broader move away from the US dollar’s dominance in international trade.
The move also aligns Russia with growing global trend of digitalization and cryptocurrency.
Technological Hindrance:- While the move of Russia towards Crypto adoption is appreciable but it came with technological barriers because Russia lacks technological advancements in this field.
Widespread Adoption:- The legislation on any subject does not prove its effectiveness it's the widespread adoption of the subject. Hence vast adoption is a major challenge.
Robust Infrastructure:- The use and effectiveness of the DFAs also depend on the compatible infrastructure for digital assets which is also a major challenge.
Exclusion of Bitcoin:- Excluding the use of Bitcoin as mode of payment for Global Trade can hinder their ability to reach the market.
In conclusion, Russia's decision to adopt cryptocurrencies and Digital Financial Assets (DFAs) for global trade marks a milestone in the crypto world. By promoting digital ruble, stablecoins, and other DFAs, Russia aims to tackle economic challenges arising due to geopolitical tensions and US sanctions. This move not only aligns with the global trend of digitalization but also presents an alternative avenue for international transactions, which challenges the dominance of traditional currencies in the international market. While facing technological and adoption challenges, Russia's step highlights the potential of cryptocurrencies in reshaping global finance and economic stability in a rapidly evolving financial ecosystem.
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