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Russia’s central bank, the Bank of Russia, has released a report on the potential launch of a digital ruble.
The new report, released on Tuesday on the Bank of Russia website, does not promise an immediate launch. According to the report, the bank is open to feedback on the idea until December 31. Then it will evaluate the data and eventually pilot a digital ruble with a limited number of users. Only then will the bank decide whether such a project will be officially launched or not.
The report proposed a central bank digital currency (CBDC) that will complement other forms of money, namely cash and bank accounts. Whether it will use a distributed ledger, a centralized system or a hybrid is an open question. The report highlights the value of smart contracts, which were pioneers on the Ethereum blockchain.
CBDCs have been a buzzword for a while. Several central banks are discussing the matter, and the People’s Bank of China is moving quickly to launch a digital yuan.
This is not the first time that the Russian central bank has explored this concept. Last summer, the head of the Bank of Russia, Elvira Nabiullina, said the bank will not issue its own digital currency anytime soon, but is investigating the matter.
Unlike cryptocurrencies and stablecoins (specifically mentioned in the report), the profitability of the digital ruble will be guaranteed by the government and specifically the Bank of Russia, the report says. According to the Bank of Russia, the already existing digital payment infrastructure used by payment terminals and ATMs can also be used as payment tracks for the digital ruble.
The digital ruble will spur innovation and competition in the financial sector because it will make transfers of funds from one financial broker to another faster and easier, the report said. It can also help ensure that funds allocated to government-funded projects are not stolen due to corruption. Each unit of the digital ruble can be labeled based on how exactly it can be spent.
The report pays particular attention to privacy. While it is not possible to use the digital ruble anonymously, unlike paper cash or decentralized cryptocurrencies, “data on transactions with the digital ruble will contain more limited information than existing payment systems,” the report said.
Specifically, banks will have access to information about who participated in a transaction, but not the purpose of the transaction, the report reads. Users of the digital ruble will go through Know-Your-Customer (KYC) procedures on the Bank of Russia technology platform.
The regulator predicts that the potential launch of the digital ruble could create a period of instability for banks if people start withdrawing funds from their accounts to buy digital rubles. In this case, the Bank of Russia will help banks maintain their balances with additional loans.
The amount of digital rubles that can be acquired at one time will also be limited, similar to the limits on cash withdrawals.
