Bank of Russia accelerates digital ruble launch amid sanctions
30-05-2022
By: Rohit Khandelwal
In reaction to Western sanctions, Russia's Central Bank
(CBR) has hastened the creation of its digital currency.
The monetary authority now plans to test operations with the new version of the national fiat in early 2023, rather than 2024, as was previously intended.
Sanctions imposed in response to Moscow's incursion of Ukraine have persuaded the Bank of Russia to accelerate the development of the ruble's digital counterpart, according to a local newspaper, citing CBR First Deputy Chairman Olga Skorobogatova. She made the announcement during a meeting hosted by the Russian Association of Banks.
According to a high-ranking official, Russia's central bank had planned to begin the digital ruble trial with real transactions and customers in 2024, but the project will now be launched in April 2023. Simultaneously, the regulator wants to begin implementing smart contracts using the digital ruble infrastructure.
The Russian Central Bank indicated last spring that a prototype of the digital ruble would be ready by the end of 2021, with trials with commercial banks beginning in 2022. It began testing the service in February this year, and later that month, it revealed the first successful transfers between individual wallets.
The users could use mobile apps to open digital ruble wallets, exchange ordinary electronic money from their bank accounts for digital rubles, and then move the currencies between themselves, according to the CBR. At the time, Skorobogatova announced that all Russians will be able to transact in digital currency for free and that it would be available in all parts of the country.
So far, a dozen Russian banks have applied to be part of the project's trial group, with three of them having already linked their systems to the central bank digital currency (CBDC) network. According to the CBR, two financial firms have successfully completed a full cycle of digital ruble transactions between clients.
Despite differences with the Ministry of Finance on the future of cryptocurrencies in Russia, the Bank of Russia began testing the digital ruble. The central bank proposed a blanket ban on crypto-related transactions, whereas the ministry wants them legalized and regulated. The issue is still being discussed in Moscow, but the central bank is sticking to its guns, claiming that legalizing their circulation poses a risk to the country's financial stability and residents.
Russian experts predict that the CBR will continue to campaign for a ban on decentralized cryptocurrencies in order to make place for the establishment of its own digital currency. They also believe that the establishment of a digital ruble will result in a withdrawal of funds from bank deposits, increased financial market rivalry, and higher interest rates.
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