Digital Ruble Likely To Help Russia Move Away From US Dollar, Economists Say

Following a historic round of strict sanctions, Russia’s economy will suffer with most foreign exchange reserve assets frozen, experts say

article-image

Central Bank of Russia | Source: Shutterstock

share

key takeaways

  • Increasingly aggressive sanctions will lead to trouble for Russian economy, currency, experts say
  • Banking group says Russian de-dollarization has been happening since 2014

Under pressure from unprecedented Western sanctions, Russia’s increased likelihood of defaulting on its foreign debt payments have economists eyeing the role of the digital ruble in reshaping the country’s economy.

Western nations have launched unprecedented sanctions against Russia in recent days, leading to an increased likelihood that the country will default on its foreign debt obligations, the Institute of International Finance (IIF) said Monday.

In a report Monday, the institute said its economists expect “the cumulative effect of sanctions on the Russian economy to be strong, leading to a sizeable contraction of output this year.”

Russia’s central bank more than doubled interest rates to 20% Monday in an attempt to limit inflation and ruble depreciation. More than half of Russia’s foreign exchange reserves are held in countries that have imposed sanctions and frozen assets, limiting the central bank’s options.

“If we stay here and [the situation] escalates, then default and restructuring is likely,” said Elina Ribakova, the IIF’s deputy chief economist, told reporters Monday.

Russia has been in the process of de-dollarization since 2014, the IIF said. The Bank of Russia has reduced the share of its reserve assets in US dollars and its holdings of US Treasurys significantly, with gold now surpassing US dollars in Russia’s reserves.

In early 2014, US dollars accounted for 43% of Russian reserves and 16% in mid-2021, according to the IIF.

The introduction of a digital ruble, the central bank digital currency that Russia is now piloting, is thought to further curtail the dollar’s influence — and potentially dull the blow of US sanctions.

“Similar to how Covid accelerated a lot of digital economy and stay-at-work adoption, this aggression by Russia and the West’s response in terms of sanctions and freezing of reserves, might accelerate the adoption of alternative payment channels and self-custodial stores of value,” Lyn Alden, founder of Lyn Alden Investment Strategies, said.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

Securitize CEO Carlos Domingo thinks BUIDL will potentially hit its next $500 million milestone in just a few months

article-image

Representatives on Thursday opted to back President Biden and uphold his veto of the legislation that sought to invalidate SAB 121

article-image

The former Valkyrie CEO chats with Blockworks about what she has her eye on as Cypherpunk Holdings’ new leader

article-image

Thursday’s CPI report shows prices are coming down more quickly than analysts had anticipated, renewing hope that central bankers will cut rates in the fall

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference