- Russia plans to commence pilot tests for the Digital Ruble, a central bank digital currency (CBDC), involving 15 banks, upon legislative approval.
- The initiative aims to mitigate the impact of international sanctions and establish independent payment mechanisms in trade with foreign partners.
Russia Steps into CBDC Arena with Digital Ruble Pilot Test
In the wake of international isolation over its conflict with Ukraine, Russia gears up to usher in the Digital Ruble. In this stride towards the digitization of currency, Russia aligns itself with other countries experimenting with electronic money.
The Federation Council, Russia’s upper house of parliament, is set to pass the legislation sanctioning the creation of a national digital currency on Wednesday, July 19. Following the endorsement by President Vladimir Putin, the Bank of Russia is expected to initiate the pilot tests of the Digital Ruble CBDC as early as the following month.
The Bank of Russia has joined hands with 15 domestic banks to facilitate the provision of digital wallets to individuals and businesses, accessible through any Russian bank. For individuals, transactions involving the Digital Ruble will be free of charge, while businesses will bear a minimal 0.3% fee per transaction, according to the bank’s guidelines.
The Digital Ruble: A Tool to Combat Economic Challenges
In light of recent sanctions implemented by the US and its allies, which severed Russian banks from the global financial system, the Bank of Russia’s CBDC project has gained momentum. As foreign banks implement stricter policies concerning payments from Russia, the country strives to attenuate the sanctions’ impact. Russia aims to amplify trade in national currencies with countries such as China and India, maintaining a neutral stance on the conflict.
Nikolay Zhuravlev, deputy chairman of the Federation Council, underscored the importance of autonomous payment instruments and financial information channels in Russia’s trade with international partners.
However, Alexandra Prokopenko, a former adviser at the Russian central bank, raised concerns about the Digital Ruble’s potential for international transactions. To facilitate such transactions, the Digital Ruble would need to be interconnected with other countries’ currency platforms, a development yet to be reported.
Prokopenko remarked that the digital ruble currently bears resemblance to a points system in the loyalty program of the ‘Fortress Russia’ corporation. This initiative could potentially streamline transactions within the country and enhance transparency in territories annexed from Ukraine, which currently rely primarily on cash.
While there had been plans for a national crypto exchange to foster crypto trading, Russia has shelved this idea for now.