Currency substitution, the use of foreign money to finance transactions between domestic residents, is a common feature of emerging market economies. Currency substitution re-duces the stability of money demand functions in ways that can seriously undermine cen-tral bank credibility and its efforts to implement monetary policy. Most transition econo-mies, including Russia, experienced widespread currency substitution in the early phase of transition. Following Russia’s financial meltdown in 1998, its monetary authorities intro-duced a raft of changes that substantially improved the stability and performance of the macroeconomy and reduced currency substitution. This paper investigates currency substi-tution in the Russian economy in the post-crisis period of 1999–2005. Several measures of currency substitution and different modelling frameworks consistently suggest an on-going decline in currency substitution, a shift that has important implications for Russian mone-tary policy.