The Central Bank of the Russian Federation (CBR) recently released a draft proposal outlining the primary monetary policy for the next three years, which includes plans to release a digital ruble by 2024, ahead of its March elections that year.
Currently in its initial testing phase, the digital ruble is part of the CBR’s plans for ‘targeted’ technology, being certain digital currencies that are exclusively programmed to pay for particular goods and services, and is due to be gradually rolled out over successive phases, unlocking more characteristics year by year to allow market participants to acclimate to the new conditions of the digital currency.
By 2023, the CBR will allow a few selected participants to execute smart contract transactions on the ruble platform to facilitate settlements between individuals and enterprises. The CBR also plans to collaborate with other countries’ central banks that have established CBDCs to facilitate cross-border and FX transactions.
The offline mode for the digital ruble will launch in 2025, connecting the bank with non-bank financial intermediaries, and integrating other financial apps and exchanges with the payment system of the CBDC.
The digital ruble has been in the works for several years. In July 2021, Russia formed a group of 12 banks to test its digital ruble, which included Sber, VTB, and Tinkoff Bank, among others, setting December 2021 as the target date for the creation of a digital ruble prototype platform and January 2022 to start testing. By December, the successful creation of its first prototype platform allowed it to release an official CBDC roadmap.
In January 2022, however, the Central Bank called for a total ban on trading and mining earlier this year to counter the emerging ‘cryptomania’ for fear it might pose a risk to the financial stability and sustainability of the Russian banking system, and in July, Russian President Vladimir Putin signed a law amendment preventing the use of digital financial assets as a means of payment for goods and services.
The amended law reaffirmed the ruble’s place as the only financially accepted currency within the Russian Federation, and forbade the use of digital assets and rights as “money surrogates”.
The reason behind Russia’s sudden change of heart is unclear, but it is possible that the introduction of a digital ruble is a last resort to counter western sanctions placed on Russia after its invasion of Ukraine. It is also expected that the launch of the digital ruble is an attempt to reassert power in the digital space after the ECB revealed plans to launch a digital euro by 2023.
Government sentiment aside, Russians remain steadfast in their love for cryptocurrency. It is estimated that, at the beginning of the year, around 17.4 million Russians, who represent roughly 12 percent of the country’s population, were using cryptocurrencies, putting the country’s total cryptocurrency value at a striking $214 billion.
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