Bank of Russia Is Studying Pros & Cons of a Digital Ruble; May Start Developing CBDC In 2021
- The Bank of Russia (BOR) is studying the possibility of launching its digital ruble.
- BOR and the Ministry of Finance investigate the advantages and cons of adopting a national digital currency within Russia.
- Can a digital ruble replace the use of the dollar in Russia?
According to Izvestia, a Russian finance news site, the Ministry of Finance and Bank of Russia investigate other nations’ efforts in releasing a central bank digital currency (CBDC). The post, published on Monday, highlights some of Russia's advantages of launching its own digital ruble, including reducing the cost of transactions, more opportunities for cross-border payments, and ending dollarization in its economy hence reducing sanctions from other countries.
Despite the advantages of the digital ruble, the Ministry of Finance cautions on the problems a CBDC could bring along. Digital currencies have long been associated with high volatility risks, poor network security, and its use in promoting illicit activities.
The central bank aims to increase its efforts in launching a digital ruble. While the final decision is yet to be made, BOR plans for the digital ruble to follow FAFT recommendations on digital assets. The digital coin is set to boost the overall domestic economy by enhancing online payments – allowing offline use of the digital ruble if there’s no internet.
According to Anatoly Aksakov, head of the State Duma Committee on the financial market, the digital ruble may start to be built as early as 2021. Once the consultation period elapses, the digital ruble will be released in a pilot phase, with several citizens using it.
Can a digital ruble help in de-dollarization?
The Russian government is working on finding a way around its economy's dollarization – a digital ruble is expected to do so. The central bank explains that the token will help end corruption, reduce the costs associated with distributing physical cash, and help Russia avoid sanctions.
The bank did not clearly say how the digital ruble will end sanctions from other countries, with Plekhanov Denis Domashchenko, a PRUE lab research lead. G.V., stating it ‘may not be the solution to sanctions.’ According to him, the digital ruble's launch has more to do with the private cryptocurrencies such as Bitcoin (BTC) circulating in the country rather than the dollar.
Russia has had a stern stand against the use and distribution of cryptocurrencies in the past. The digital ruble will not be any different from the regulator, stating that only the issued CBDC will be accepted as money across the country.