Central Bank Of Russia Says CBDCs Can Minimize Costs, But Privacy Is A Concern
Central Bank Of Russia Analyses Benefits And Drawbacks Of Issuing A CBDC
The Central Bank of Russia is analyzing the positive and negative effects of issuing a central bank digital currency (CBDC). The information was released by the institution on April 18. The intention is to better understand possible use cases for CBDCs.
Russia’s Central Bank Analyses CBDCs
The document starts by asking whether there is a future for central bank digital currencies and it outlines a set of potential benefits related to CBDCs and their implementation in the market. For example, they could reduce costs and provide a more liquid asset.
The bank explains that this solution will minimize transaction costs if it can offer a better tool in terms of ease of use in payments and also savings. Moreover, the document explains that although a CBDC can be useful for regulators to track transactions, users would not be encouraged to use this means of payment since it will reduce their privacy.
The report released by the central bank reads as follows:
“CBDC de fact cannot provide the same level of anonymity that is provided by cash. This is certainly an advantage for regulators but can be considered a disadvantage by users, not only those who are involved in suspicious activities but those who are concerned about privacy.”
The financial institution has also mentioned that CBDCs can compete with commercial bank deposits when there are low inflation rates and moderate interest rates in the economy.
This is not the first central bank that analyzes the possibility to issue a CBDC. Countries such as Sweden, Uruguay, Canada, Ukraine or the United Kingdom are also trying to understand how these CBDCs could affect the economy and help improve some sectors. Nonetheless, none of these countries has launched a central bank digital currency.
At the moment, Venezuela is the only country that launched a government-backed virtual currency called Petro. However, this digital asset does not seem to be operating. The main intention behind the Petro was to avoid financial sanctions imposed by the United States and other countries.