The Belarusian government has expressed interest in developing its own central bank digital currency (CBDC) as a way of evading international economic sanctions. The country’s president, Alexander Lukashenko, has said that the digital currency could help to counter the financial restrictions imposed by Western countries, including the U.S., due to his human rights record and the jailing of political opponents.
As a response to the sanctions, Belarus has been exploring a CBDC for some time; the Belarusian central bank has been researching the feasibility of a CBDC since mid-2019. The push for a CBDC in Belarus appears to be driven by the need to find alternative means of transacting and dealing with outside sources of capital, as access to foreign investments have become increasingly difficult due to sanctions.
The use of a CBDC could help Belarus bypass traditional payment systems, which have been subject to scrutiny and have had their access to foreign markets blocked. A CBDC could also help reduce reliance on foreign currencies and facilitate the flow of capital within the country, while at the same time allowing for a greater degree of control over the currency supply.
However, there are significant technical, regulatory, and security challenges to be overcome before a functioning CBDC could be deployed in Belarus. It remains to be seen whether the government will be able to establish a comprehensive regulatory framework for digital currency use and ensure that its CBDC is safe and secure from cyberattacks and other malicious activities. In addition, Belarus would need to ensure that its CBDC complies with international financial standards, such as the Financial Action Task Force (FATF) recommendations.
