Nearly nine-tenths of cross-border payments are settled in locally issued currencies, yet this arrangement brings notable challenges for Russian participants. This observation comes from Anna Davydova, who heads the Foreign Economic Activity-Import direction at Tochka, sharing insights with socialbites.ca.
One key hurdle is that not every currency is freely convertible. In practical terms, some currencies can only be exchanged under specific rules or constraints. Examples include the Serbian dinar, the Armenian dram, and the Arab dirham. Such limitations can complicate the timing and feasibility of international settlements, forcing businesses to navigate additional verification steps and regulatory screens before converting proceeds. Davydova notes that the liquidity and buildup of available quotes from counterpart banks influence the effective rate, and that these rates can be high when dealing with restricted convertibility.
Second, currency volatility poses another risk. Some national units experience pronounced and rapid swings in value, which can destabilize budgeting and pricing for cross-border transactions. Davydova pointed to the Turkish lira as a representative case. Historical context highlights the pattern: at the start of 2022, the lira traded around 9.3 per U.S. dollar, and by early 2021 the rate had shifted to about 8.1 per dollar, creating pronounced uncertainty for importers and exporters alike. In more recent periods, the exchange rate for the dollar against the lira has surged further, illustrating how macroeconomic pressures translate into practical settlement costs—illustrated by the modern figure hovering around 28 lira per dollar in some episodes. Such movements compel traders to reassess hedging needs, forecast cash flows, and adjust payment terms to mitigate currency risk.
Third, foreign financial institutions can impose restrictions when handling national currencies. In several instances, a foreign credit institution may unexpectedly decline payment or require additional documentation. Davydova explains that these actions often reflect broader policy directions issued by a country’s central bank regarding operations with Russian counterparties. The consequence for businesses is a need for enhanced risk management and contingency planning. Firms must consider alternative routes, such as using more convertible corridors or negotiating settlement in currencies with more predictable liquidity, while maintaining compliance with evolving regulatory requirements.
The broader shift toward using national currencies for international settlements has become a regional trend, yet the global economy still lacks sufficient prerequisites for a broad de-dollarization. A senior banker from VEB.RF and former Russian deputy finance minister Sergei Storchak discussed this on the eve of a major regional forum, highlighting how the move toward domestic currency settlements can reduce exchange-rate exposure but also requires parallel improvements in payment infrastructures, standardization of regulatory frameworks, and bilateral cooperation among central banks. These factors collectively determine how quickly a national currency can be adopted for diverse cross-border activities and how resilient the system remains to external shocks. (Source: socialbites.ca)
In summary, the journey toward broader use of national currencies in cross-border payments is advancing in certain regions, but remains constrained by convertibility rules, currency volatility, and institutional risk. For participants in Russia and its trading partners, these dynamics call for a careful assessment of currency risk, liquidity planning, and diversification of settlement channels. The experience of recent years suggests that progress will hinge on aligning macroeconomic stability with robust financial infrastructure and clear regulatory guidance, enabling more predictable and cost-efficient international transactions. (Source: socialbites.ca)