Digital Financial Assets: Bypassing Traditional Payment Systems?

Sanctions imposed on Belarus and Russia have created significant barriers to international trade. Traditional payment systems have become inaccessible, and currency transactions are challenging. In this context, the governments of Belarus and Russia are considering digital financial assets (DFAs) as a new tool to circumvent restrictions. DFAs could potentially be used to finance exports and imports without relying on traditional banks—though this remains largely theoretical for now.

The first cross-border transactions using digital financial assets between Russia and Belarus have taken place. This was reported by Anatoly Aksakov, head of the State Duma’s Committee on Financial Markets, who predicted a “breakthrough” in the DFA market next year, particularly in the realm of international settlements. According to Aksakov, the development of this market could drive structural economic reform and increase investment in key industries.

The law on DFAs, which grants the Central Bank control over transactions involving them, came into force in 2021. In 2022, companies issued the first digital assets—digitized rights allowing holders to demand obligations from issuers in the form of money, goods, securities, or shares in a company’s capital. In March 2024, President Putin signed a law permitting DFAs, utility digital rights (UDRs), and hybrid digital rights combining both tools to be used in international transactions.

Under Russian legislation, digital financial assets are blockchain records certifying the digital rights of their holders. In Belarus, similar concepts are more commonly referred to as tokens. These tokens can represent monetary claims, securities, equity in non-public joint-stock companies, or rights to transfer securities. Essentially, these rights may pertain to actual or potential assets. Therefore, DFAs are not cryptocurrencies and are not recognized as legal tender.

According to RBC, the volume of DFAs issued in Russia in the first nine months of 2024 reached approximately RUB 316 billion across 470 issuances. It is expected that by the end of the year, the volume of such issuances may exceed RUB 500 billion, potentially approaching RUB 1 trillion in 2025.

Evaluating the role of DFAs in international settlements, Russian Finance Minister Anton Siluanov suggested that DFAs might replace traditional payments due to advantages such as lower cost, speed, and reliability. According to the minister, these instruments are better suited for international transactions than cryptocurrencies.

However, some Russian experts have expressed doubts about the prospects of DFAs as a tool for international settlements, citing legislative hurdles. It seems more likely that cryptocurrencies and the digital ruble will play a more prominent role in foreign economic activity. Furthermore, under the DFA law, such assets are not considered legal tender but rather a form of accumulation. Since DFAs are not legally equivalent to money, transactions involving them entail additional costs, potentially complicating their use for businesses.

Experts also warn that DFAs, like traditional financial assets, are vulnerable to fraud, volatility, and manipulation. Without a robust legal framework to protect investors, the DFA market could become unpredictable and insecure. Platforms for issuing and trading DFAs are attractive targets for hackers and scammers. Moreover, an insufficiently developed legal basis could lead to disputes among market participants. Finally, new technologies bring their own risks: the threat of cyberattacks requires additional efforts from governments and businesses to create a secure environment.

Myfin.by reached out to the National Bank of Belarus for details about the pilot cross-border transactions between Belarus and Russia. However, Tsimashenka, head of the Information and Public Relations Department at the NBB, stated that “details can only be obtained from those who disseminated this information.”