RusAg: digital financial assets may prove cost-effective in agribusiness on a five-year horizon

Within the next five years, Russia may successfully launch the use of digital financial assets (DFA) in supply chain financing (for supplies made from small producers to large food processors) or in reverse mechanisms such as purchase guarantees. Projects of that sort may be originated not only because they are more cost-effective, but also through ESG initiatives or product labelling, said Dmitry Tarasov, Head of the RusAg Centre for Macroeconomic and Regional Analysis and Forecasting.
He believes that some areas where digital assets can be used most efficiently may be identified as early as now in Russian agribusiness and forestry drawing on international experience.
‘As regards emerging economies, it has been shown that there is a good case for DFA in climate insurance in agriculture or contracts to restore forests and generate “carbon credits” under programmes for limiting greenhouse gas emissions,’ said he.
According to Mr Tarasov, digital assets could be used successfully in supply chain financing where supplies are made from small producers to large food processors or in reverse mechanisms that operate as product purchase guarantees under specific schemes. There are also good prospects for assets used in agricultural product certification systems.
‘Digital asset technology in these sectors will help reduce costs on every phase of agricultural production and processing, bringing more investors to agribusiness. To make this happen on the Russian market it is essential to achieve the proper risk-benefit balance through regulation,’ added Mr Tarasov.
The DFA law was passed almost a year ago but not a single project has been delivered, because, in his opinion, some of the key issues still remain unresolved, including taxation and VAT.
‘All these issues have been standing in the way in a situation where payment services operate and securities circulate perfectly well. Nobody is in a hurry to use DFA as there have been no flagship projects and higher efficiency has not been proven in practice,’ added Mr Tarasov.
He referred to a survey conducted by the Russian Union of Industrialists and Entrepreneurs in 2021. It demonstrated that most of the participants, fully cognizant of the risks associated with DFA projects, were biding their time as they did not see any major economic benefits coming their way. Mr Tarasov believes that, in addition to finalising regulation, it is essential to launch several trailblazing projects under regulators’ direct supervision to make a strong case and show that costs can really be cut and cost-effectiveness improved