Russian President Vladimir Putin has recently signed a bill that will introduce a digital version of the country’s national currency, the ruble. This move grants legal authority to the Bank of Russia, the country’s central bank, to serve as the platform operator for the digital ruble.
Under the newly signed law, the central bank of Russia will be responsible for managing digital ruble accounts and will be the principal operator of the digital ruble infrastructure. They will also hold responsibility for all stored assets related to the digital currency. The digital ruble will exist as a new form of payment, alongside cash and non-cash rubles.
The bill’s passage allows the Bank of Russia to commence tests of the Central Bank Digital Currency (CBDC) starting from August 1. However, Bank of Russia governor Elvira Nabiullina emphasized in a statement that it is not compulsory for Russian citizens to use the CBDC. Instead, individuals will have the freedom to choose whether or not to adopt the digital ruble.
Nabiullina expressed her hopes that the digital ruble would offer greater convenience and cost-effectiveness for both individuals and businesses, presenting new opportunities. She stated, “No one is going to force anyone into the digital ruble… But we really hope that it will be more convenient and cheaper for both people and businesses, and they will start using it. This is a new opportunity.”
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The idea of a digital ruble has been discussed in Russia for several years. However, it gained significant traction following the imposition of sanctions by the United States and its allies. These circumstances prompted a sense of urgency to launch the CBDC, leading to the swift passage of the bill in both houses of Russia’s parliament.
The Bank of Russia has been diligently working on the development of the digital ruble. In 2020, they released an analytical report on the topic, which included feedback from Russian banks and other financial market participants. Pilot tests were conducted with several banks in the country in February 2022.
The outbreak of the war in Ukraine further highlighted the need to implement the digital ruble as a means to mitigate the impact of Western sanctions. This urgency pushed Russia to accelerate its CBDC development and finally bring it to fruition.
Apart from Russia, 21 other nations have also launched pilot programs for CBDCs, as indicated by the Atlantic Council CBDC tracker. The tracker reveals that 130 countries, representing 98% of global GDP, are currently exploring the possibility of implementing a CBDC. Furthermore, 19 out of the G20 countries are in the advanced stage of CBDC development.
Among the 11 countries that have fully launched a CBDC are China, The Bahamas, Nigeria, Anguilla, Jamaica, and seven Eastern Caribbean countries. It is noteworthy that the United States has no confirmed plans to launch a digital currency, although the country is progressing with a wholesale CBDC, exclusively for bank-to-bank transactions.
Since Russia’s invasion of Ukraine and the subsequent G7 sanctions response, wholesale CBDC developments have doubled. Currently, there are 12 ongoing cross-border wholesale CBDC projects.
In conclusion, the introduction of the digital ruble in Russia marks an important milestone in the country’s financial ecosystem. With the official passage of the bill, the Bank of Russia is now empowered to test and manage the digital ruble accounts and infrastructure. While adoption of the digital ruble is not mandatory, it is hoped that its convenience and cost-effectiveness will encourage individuals and businesses to embrace this new form of payment. As Russia joins the growing list of countries exploring and implementing CBDCs, the global financial landscape is continually evolving.
