Russia has begun testing its central bank digital currency (CBDC), known as the digital ruble. The country’s central bank announced that they had completed the first few transactions between individual crypto wallets. The monetary authority in Russia is strongly opposed to cryptocurrencies in general but has shown a favorable attitude towards a central bank digital currency. It stated that introducing digital currency in Russia would help in creating new opportunities for businesses and citizens in the country. The digitalized national fiat currency is being tested by the Central Bank of the Russian Federation (CBR), as well as other participating financial institutions.
A prototype for the digital ruble had been developed back in December 2021 and they have now officially launched trials to test it out. The pilot group that had been formed for the development of the project included twelve banks. Three of these banks have already integrated their system with the CBDC platform. The regulator stated that two of the participating banks had used their mobile banking applications for completing a full cycle of transfers of the digital ruble successfully between clients. The users were able to use the mobile banking apps to open digital ruble wallets.
They then used the electronic money they had in their bank accounts and exchanged it for digital rubles. The CBR said in the announcement that the users had then transferred these digital rubles between each other. A two-tier model has been used for the development of the central bank digital currency. The platform’s issuer and operator is the Bank of Russia, while end customers use intermediaries for accessing the platform. The customers will be able to use the mobile app of any bank for creating wallets and then conducting transactions. Olga Skorobogatova, the CBR’s First Deputy Chairman, stated that the digital ruble platform was offering the businesses and citizens of the Russian state a new opportunity.
She went on to say that Russian residents would be able to make transfers with the digital ruble from anywhere in the country and it is free of cost. The transaction costs for companies will also be reduced by the system and it would enable them to offer new products and services. Moreover, it will also function as a tool for managing the government’s budget and for making targeted payments. In the first stages of the trial, the participants will be able to open crypto wallets for private clients and banks. Processing payments is the second stage, which includes implementing smart contracts, public services as well as interactions with the Federal Treasury.
Offline transactions will also be introduced in the future and eventually permit non-residents to also use digital currency. Depending on the results of the pilot phase, the CBR would draft a roadmap for implementing the digital version of the fiat currency. The CBDC has been underdeveloped while there have been discussions ongoing about the future of cryptocurrencies in the country. The central bank has opposed the legalization of cryptocurrencies vehemently and even suggested a blanket ban on them.