The Russian Central Bank’s recent proposal to classify the national Central Bank Digital Currency (CBDC), the digital ruble, as a “high-quality liquid asset” (HQLA) might herald an upcoming shift of the banking landscape. Usually, this status has been reserved for investment-grade options such as government bonds, fiat cash, or central bank reserves. With CBDCs potentially joining the league, there’s an expectation for a dramatic reconfiguration of how financial institutions perceive and maintain their liquid assets.
The prospect of digital ruble featuring in HQLA calculations appears as a radical break from conventional thinking. However, it’s not without controversial undertones. The draft on revised liquidity calculation methodologies, given by the central bank, led the financial players till September 23 to voice their responses. If approved without any amendments, commercial banks will have no choice but to follow these practices starting October 1, 2024.
Commenting on a similar vein, economist Ruth Wandhöfer cited in a 2022 article that CBDC transformations could overhaul cross-border payment methods. She elucidated, moving the cross-border financial transactions away from expensive commercial credit and towards payments backed by HQLAs could catalyze a stable, fast and frictionless transactional ecosystem.
However, not all banks view this shift in the same positive light. There seems to be a lingering sense of apprehension among commercial banking institutions concerning the digital ruble. This recent development is likely to accentuate their skepticism. A heightened level of ambiguity remains as to whether the Russian Central Bank aligns itself with Wandhöfer’s standpoint.
What seems beyond doubt, however, is the bank’s aspiration to deploy its digital asset for cross-border transactions, and sooner than later. Countries like Belarus and Kazakhstan, traditional allies of Russia, have already embarked on their digital fiat journey. The Russian Central Bank anticipates to go full-fledged with its digital currency rollout, expected to happen nationwide between 2025 and 2027.
BRICS counterparts like China and Brazil are among those who are fast progressing in their digital currency projects. Along with aiming to de-dollarize their trading networks, there’s speculations about the possible formation of CBDC “working groups” in the coming weeks. These advancements suggest an unmistakable turn towards a digital-driven future for banking and cross-border transactions. Yet, the blend of anticipation and uncertainty hangs over the immediate aftermath that such radical changes could bring about.
Source: Cryptonews
