Current Affairs: Passage of the Day - 26 July 2024 | Current Affairs & General Knowledge - CLAT PDF Download

Directions: Read the passage carefully and answer the questions that follow.
The increased use of digital assets in cross-border settlements between Russia and China is easing bilateral payment issues, digital platform Qifa told Reuters, as some settlements directly through banks are taking months to clear due to sanctions.
Qifa, founded in 2013 and Chinese owned, initially focused on importing Chinese consumer goods to Russia. This year, however, it launched bilateral trade, tapping into surging trade between the two countries even as the threat of secondary U.S. sanctions on Chinese banks complicates payment flows with more stringent compliance procedures.
The dwindling pool of banks in China willing to risk possible sanctions retribution has caused payment bottlenecks and increasingly complex steps to avoid delays, including a workaround using small, regional Chinese banks, that can operate below the radar.
Facing those hurdles, Qifa, which operates out of Beijing and Moscow and will soon list on the Moscow Exchange, has turned to digital asset and cryptocurrency settlements that can happen in a single day.
Qifa founder Sun Tianshu said the company was closely monitoring legislation on both sides of the border and was already facilitating cross-border payments using tether (USDT) - a so-called 'stablecoin' that retains a steady value in dollars.
Russia allows settlements using some digital financial assets that can bypass the banking system such as tether. The Russian parliament is also considering a bill that would legalise all cryptocurrencies as a means of payment in foreign trade.
Increased compliance
"Payment delays are due to the fact that many Russian counterparties have faced increased compliance from Chinese banks for supplies to Russia," deputy board chairman Kyle Shostak said in an interview. "Many Russian counterparties are not completely used to such practices and don't know how to respond to these requests."
Payments used to take a maximum of one or two days, but now, various procedures and checks are delaying payments by one to three months, said Tianshu. In some cases, insufficient documentation thwarts transactions, but companies are beginning to adapt.
"There is a good trend now - many payments and many companies that passed these checks have correctly compiled the packages of documents," Tianshu said in the same interview.
But doubts over whether some products are dual use can mean longer delays, Tianshu said.
Western sanctions prohibit the shipment of dual-use goods to Russia that could be used to sustain the conflict in Ukraine. China is seen by the U.S. government as a key global hub for Russia to source materials for its military, including semiconductors and drone parts.
Qifa set the price range on Thursday for its listing on the Moscow Exchange at 92-110 roubles ($1.08-$1.29 per share). It said it is looking at development in Kazakhstan and other former Soviet countries.
[Excerpt from Economics Times “Digital Assets Ease Payment Issues Between Russia and China” Dated 26/07/24]

Q1: What was the primary goal of Qifa when it was first established in 2013?
(a) Facilitating Russian imports to China
(b) Facilitating Chinese imports to Russia
(c) Promoting digital currencies in international trade
(d) Expanding bilateral trade agreements

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Q2: Which digital asset is Qifa primarily using to facilitate transactions between Russia and China?
(a) Bitcoin (BTC)
(b) Ethereum (ETH)
(c) Ripple (XRP)
(d) Tether (USDT)

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Q3: What is one of the main reasons for the increased use of digital assets in transactions between Russia and China?
(a) Lower transaction fees
(b) Fast approval by international banks
(c) Delays in traditional bank transactions due to sanctions
(d) Lack of compliance regulations in both countries

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Q4: What potential legislative development in Russia could impact the use of digital assets in international trade?
(a) A ban on all cryptocurrencies
(b) Legalization of cryptocurrencies for international trade
(c) Increased taxes on digital asset transactions
(d) Restrictions on the use of stablecoins like Tether (USDT)

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Q5: What is a common feature of bilateral trade agreements?
(a) They typically involve more than two countries
(b) They lead to the elimination of all tariffs between the countries involved
(c) They can strengthen economic ties and may include trade deals that lower taxes
(d) They primarily focus on digital asset transactions

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