Russia and China Embrace Digital Payments Amid Trade Sanctions
Russia and China use digital payments to circumvent trade settlement obstacles. Qifa uses cryptocurrency for cross-border transactions, resulting in speedier payment processing. Compliance issues and concerns about dual-use commodities cause payment delays.
Qifa, a Chinese-owned platform that launched in 2013, has turned its focus to enabling cross-border trade between Russia and China. Delays in regular bank transactions, worsened by the potential of secondary US penalties on Chinese banks, have hampered the two countries' trade expansion.
The diminishing number of Chinese banks willing to conduct transactions due to the risk of sanctions has resulted in payment bottlenecks. To address these issues, Qifa has turned to digital asset and cryptocurrency settlements, which allow transactions to be finalised within a day.
Sun Tianshu, the founder of Qifa, emphasised the company's adaptability to the changing market by using tether (USDT), a stablecoin tethered to the US dollar, for cross-border payments. Russia has also embraced the use of digital financial assets like tether to bypass traditional banking systems, with discussions underway to legalise cryptocurrencies for foreign trade payments.
The increased compliance requirements imposed by Chinese banks on Russian counterparties have resulted in extended payment processing times, from one to two days to up to three months. Despite these problems, businesses are gradually adapting to the new regulations to assure more efficient transactions.
While progress is being made towards achieving compliance criteria, concerns about the dual-use nature of particular items continue to present challenges and cause additional delays. Western sanctions prevent the supply of products to Russia that could potentially contribute to the crisis in Ukraine, despite China being a major source of resources for Russia's military needs.
Qifa's upcoming offering on the Moscow Exchange reflects its strategic growth ambitions, with a price range of 92-110 roubles ($1.08-$1.29 per share). The organisation is also looking for expansion potential in Kazakhstan and other former Soviet republics.
Russia and China resort to digital payments to overcome trade settlement challenges
Qifa utilises cryptocurrencies for cross-border transactions, ensuring faster payment processing
Compliance hurdles and concerns over dual-use goods impact payment delays
Source: REUTERS