Amid ongoing sanctions, the government of Russia has been working to limit the country’s dependence on the U.S. dollar. The Ministry of Foreign Affairs now says it’s possible to partially replace the greenback in currency reserves and trade settlements with other currencies and even digital assets in the future.
Foreign Ministry Official Sees Russia Acquiring Digital Assets to Reduce US Dollar Dependence
In its efforts to counter the negative effects of expanding U.S. sanctions, the Russian Federation is putting an emphasis on “dedollarization,” Deputy Foreign Minister Alexander Pankin remarked in a recent interview with the Interfax news agency. The “purposeful work” aimed at limiting the influence of the U.S. dollar on the domestic economy and foreign trade operations is decreasing the “sanctions risks,” the high-ranking diplomat added.
However, challenges associated with these sanctions still remain, and Pankin stated that Russia’s “settlements with major trading partners need protection and stability in the context of the currency used.” For the time being, Moscow is not facing sanction threats with euro settlements and transfers, but U.S. dollar payments. Pankin explained these go through U.S. banks and clearing systems which allow authorities in Washington to block any transactions they view as suspicious.
Alexander Pankin
In these circumstances, Foreign Minister Sergey Lavrov’s deputy thinks the expediency of further reducing the share of the dollar in the nation’s foreign currency reserves as well as its use in international settlements is beyond doubt. Russia can replace the U.S. fiat money with other national and regional currencies “and in the future, probably, with some kind of digital assets,” Pankin pondered.
This would require significant efforts in bilateral, regional, and multilateral formats, noted Alexander Pankin, who oversees international economic cooperation at the Ministry of Foreign Affairs. Established models of cooperation between states and commercial structures would have to be reorganized and appropriate mechanisms to support the functioning of new settlement systems would need to be introduced, the government official elaborated.
Pankin’s comments come after President Vladimir Putin warned Washington that “the United States is cutting the branch it is sitting on” by undermining the dollar for the sake of momentary political gain. Speaking with CNBC’s journalist Hadley Gamble, the Russian leader admitted that cryptocurrency has value and “the right to exist.” In the interview, published by the Kremlin last week, he stated that crypto can be used for settlements in the trade of oil and other energy resources in the future.
Cryptocurrencies and related activities have been partially regulated with the adoption of the law “On Digital Financial Assets” which went into force this year, but Russia needs to further amend its legislation to ensure comprehensive regulation. While digital coins are viewed as money surrogates and prohibited as payment tools under current law (which affirms the ruble as the only legal tender), the government in Moscow has recently indicated it’s not planning to ban Russian citizens from acquiring cryptocurrencies.
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