- Iran and Russia are collaborating on Central Bank Digital Currency (CBDC) and Digital Financial Asset (DFA)-powered trade solutions, as confirmed by an Iranian official.
- The move is seen as a strategic step to mitigate the impact of sanctions and simplify trade between the two nations.
- However, challenges remain in the implementation of CBDC-related payments, necessitating the creation of infrastructure and regulations for new payment methods.
Iran and Russia are exploring the use of CBDCs and DFAs to simplify trade and potentially mitigate the impact of sanctions. However, the implementation of these digital currencies poses challenges that require the creation of new infrastructure and regulations.
Iran and Russia: Exploring CBDC Trade Regulations
Rahimi Mohsen, the trade attaché of the Iranian Embassy in Russia, stated that nations are exploring the use of DFAs and CBDCs to simplify trade between Tehran and Moscow. CBDCs, including the digital ruble and Iran’s project, the so-called crypto-rial, could potentially mitigate the impact of sanctions. However, Mohsen conceded that difficulties remain with CBDC-related payments, necessitating lawmakers to create infrastructure and regulations for new payment methods.
Impact of Sanctions on Russia and Iran
Sanctions packages from the US, the EU, and allied nations have significantly impacted Russia and Iran, making them more interested than ever in cooperating on CBDC-powered trade solutions. Maxim Chereshnev, the Chairman of Russia’s Council for the Development of Foreign Trade and International Economic Relations, stated that a CBDC-powered partnership with Iran was strategically important to Moscow, potentially strengthening its influence in the Middle East and Central Asia.
Non-USD Fiat Trades Cost Russian Firms
The inability to make payments in dollars and euros has forced Russia and Iran to use their own fiat currencies in trade deals. This causes difficulties in converting currencies and discrepancies between Iranian currency market rates and state-controlled rates. As a result, Russian businesses currently lose about 20-25% in every trade deal they make using fiat. Chereshnev believes that CBDCs would help alleviate this issue.
More Russian Partners Ready for CBDC Trading?
Russian banks and other firms have begun issuing DFAs as they look to increase domestic investment options. Several other Russian allies, including Belarus, have begun accelerating their own digital fiat projects. Russian lawmakers have also floated the idea of doing business with China using the digital ruble and the Beijing-backed digital yuan.
Conclusion
The exploration of CBDCs and DFAs by Iran and Russia signifies a strategic move to simplify trade and mitigate the impact of sanctions. However, the implementation of these digital currencies poses challenges that require the creation of new infrastructure and regulations. With more Russian partners ready for CBDC trading, the future of digital currencies in international trade looks promising.
