Before the conflict with Ukraine began, there had been discussions ongoing in Russia about the legal status of digital financial assets (DFAs), a term introduced to refer to digital currencies in the country.
But, things had been moving slowly, with the Central Bank of Russia (CBR) against legalizing cryptocurrencies in the country, believing them to be a threat to the stability of the financial system.
However, once the conflict with Ukraine started and Western nations imposed sanctions that cut Russia off from the global financial system, the focus on crypto increased.
Since they offer the country a way of evading sanctions, interest in DFAs has surged and significant progress has been made in their application.
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Now, a Russian firm just announced that they conducted the first authorized transaction in the country using digital financial assets (DFAs), which involve the use of a foreign currency.
This foreign currency was the Chinese yuan in this case. According to reports, it is the largest deal to have been made under the existing law in Russia that applies to DFAs.
It involves issuing tokens that are secured by commercial debt. The transaction conducted by the licensed firm involved issuing digital financial assets that were worth 58 million Chinese yuan.
These were equal to $8.26 million, or 516 million rubles and commercial debt was used to secure them.
Lighthouse had developed the platform that was used for conducting the transaction involving the DFAs and it had received approval from the Bank of Russia back in March.
It was given the status of information systems operators that are permitted to manage digital financial assets (DFAs).
Some of the others that were also granted the same authorization included Sber, the largest bank in Russia, and Atomyze, the tokenization service.
The development of a comprehensive legal framework for addressing all digital assets is currently ongoing by Russian authorities, which include cryptocurrencies.
However, there is already one law in place in Russia named ‘On Digital Financial Assets’, which had been enforced in January last year and it regulates transactions involving tokens and coins that have an issuer.
Officials in Moscow have now become interested in legalizing cross-border settlements via cryptocurrencies.
They also want to reduce dependence on the US dollar by expanding the use of the Russian ruble as well as the national currencies of foreign trade partners, such as China.
Not only will this reduce their dependence on the euro and the US dollar, but it would also help in circumventing the sanctions imposed by the West due to the war with Ukraine.
It was also highlighted by Lighthouse that the first transaction that uses foreign fiat and digital financial assets has also become the biggest one of its kind in the Russian DFA market.
The tokens that have been issued in this transaction have a maturity of 29 days and the fintech company also disclosed that the interest rate associated with them is 4%.
This also shows the benefits the DFAs can offer in terms of short-term lending as opposed to rubles because the latter has an interest rate of somewhere between 9% and 10%.
Moreover, the use of DFAs can also keep the issuer safe from the risk associated with currency fluctuations.
The General Director of Lighthouse said that the new financial instrument would offer cheaper short-term investments and not compete with the traditional bond market.