Russia’s Central Bank Plans to Launch its CBDC-Digital Ruble across all Banks in 2024

The Bank of Russia launched a digital ruble experiment in 2022 to explore business models and innovative use cases for central bank digital currencies (CBDCs).

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The Central Bank of Russia emphasized that the pilot project aims to better understand the regulatory, legal, and technical aspects of CBDCs, and plans to launch an official digital ruble within a few years.

Russia’s central bank’s latest monetary policy said the country plans to connect the digital ruble platform to all banks and credit institutions by 2024.

In March 2024, a new round of elections will be held on whether the current Russian President Vladimir Putin will be re-elected. By then, the digital ruble is expected to have completed customer-to-customer transaction trials and customer-to-business and business-to-customer settlements.

To facilitate the rollout of the digital ruble, the Bank of Russia will also conduct a beta test of the digital ruble-based smart contract with a limited number of participants in 2023.

At the same time, it is expected that in 2025, the offline mode of the digital ruble will be completed.

The Central Bank of Russia stated:

“The phased process of introducing the digital ruble will provide market participants with the opportunity to adapt to new conditions.”

The Bank of Russia noted that the Russian economy is increasingly digitized, thus requiring an advanced payment system based on a government-backed digital currency.

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Bank of Russia Commences Digital Ruble Trials

The Bank of Russia (BoR) has announced the commencement of its Digital Ruble trials, making the most ambitious push for a functional Central Bank Digital Currency (CBDC) for the country.

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As announced by the bank, the trials became necessary following the creation of a prototype of the digital ruble platform was completed in December 2021.

Following this completion, the Bank of Russia received volunteers from 12 banks to be a part of the trial exercises for the CBDC. Of these 12, three connected their system with the Digital Ruble platform, and two successfully changed non-fiat ruble into digital ruble and transferred this same funds to other people. All of them successfully opened a wallet that supported the CBDC.

“The digital ruble platform is a new opportunity for citizens, businesses, and the state. We plan that for citizens, transfers in digital rubles will be free and available in any region of the country, and for businesses, this will reduce costs and create opportunities for the development of innovative products and services. The state will also receive a new tool for targeted payments and administration of budget payments,” said Olga Skorobogatova, First Deputy Chairman of the Bank of Russia.” 

In addition, Olga confirmed that the BOR “will test various scenarios and refine the digital ruble platform this year. In the next stages of platform development, we also plan to provide seamless interaction with digital platforms and digital ecosystems.”

The Digital Ruble trial comes following the highly controversial plans by the apex bank to ban Bitcoin and all related Proof-of-Work (PoW) mining activities. The approach to prohibit the premier digital currency takes close precedence to associated actions by the People’s Bank of China (PBoC), which recently debuted its e-CNY CBDC at the ongoing Beijing Olympics games.

With more stages outlined for the Digital Ruble, the chances are that the BoR will introduce some sort of regulation to tame BTC for the Digital Ruble to have less competition when it finally sees the light of day.

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Digital Rubble Prototype to be Introduced in Early 2022

In line with the development of its Central Bank Digital Currency (CBDC), dubbed the Digital Rubble, the Central Bank of Russia is set to launch a prototype platform for the new form of money in early 2022.

According to a report from Reuters, citing the Central Bank Governor Elvira Nabiullina, the prototype platform will be succeeded by a pilot test. The apex bank will make a final decision on whether to launch the Digital Ruble or not.

Russia has had its eyes on the emerging CBDC trend since at least the fourth quarter of 2022. With the latest advances from the country, the State Duma is also set to formulate new laws that will bolster the ultimate emergence of the Digital Ruble. As reported earlier by the local news channel, Izvestia, the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, affirmed that the legal framework governing the CBDC will be worked on the proposed trial is implemented next year.

According to extant monetary provisions, as many as eight Federal laws and five codes ranging from the Civil Code, Tax Code, Budgetary Code, Criminal Code, and Administrative Code will have to be revised in order to accommodate the administrations of the Digital Ruble. Per the report, the legal framework that will emanate from the lawmakers will address many key aspects, including the Central Bank’s powers to issue and circulate the Digital Ruble.

Preparations have been underway for a potential Digital Ruble pilot test with as many as 5 Russian banks ready to join the test per an earlier report by Blockchain.News. Many experts believe the race to float a CBDC is crucial to tag along with the ongoing monetary revolution is heating up, and the Central Bank of Russia is duly tagging along.

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Russian Central Bank Confirms Digital Rouble Trials Commence in 2022

The head of the Russian Central Bank, Elvira Nabiullina, has confirmed that digital ruble trials will begin in 2022. Earlier, the central bank of the country expressed its intention to start testing a CBDC in April. Digital financial assets are considered property under the Russian legislation, according to a law implemented on Jan 1.

Digital Ruble Development in Russia

The ruble remains the only legal tender that all organizations are obligated to take; however, they may accept other forms of payment through an agreement between parties to a contract. The Russian Central Bank objects to cryptocurrency payment.

Russia has been working for some time now in crypto-regulation, and in 2019 was one of the early countries to control cryptocurrencies based on established property rules, compared with many western counterparts. Finally, in January of this year, the government approved the official regulations.

Russia has been examining CBDC for some time, and feedback and internal deliberation have resulted in this latest report. Private banks and institutions will be part of the pilot program.

The New Age

It works in a tiered scheme, whereby the central bank opens wallets to store digital Rubles for commercial banks. A client has access inside his bank application to the digital ruble wallet. They will not, however, be able to use offline bank applications. Users must install a separate wallet for this reason. Smart contracts will also be a priority, as the bank wants conditional transactions to be a choice.

Notably, digital rubles are still available to end-users. Wallets are also accessible through other institutions in the case of bankruptcy.

Furthermore, the Russian government is considering the use of Bitcoin as a contractual trade instrument.

Other Countries in CBDCs

While there are no definite dates for implementing the CBDC beyond the pilot projects, the aim is clear. Russia doesn’t want to get left behind in the FinTech race that already encompasses several major developed nations.

China is at the forefront with its digital yuan in developing national sovereign digital currencies, which is undergoing a wide trial phase, waiting very soon for its launch. The country has already spearheaded several successful CBDC pilots. In general, China is keen to use DLTs to digitize its economy, with authorities developing a decade-long blockchain plan.

In addition to China, the USA, the UK, and Israel are all working aggressively on developing their sovereign CBDCs. Bitcoin’s price rises in a certain way and studies into digitized currency benefits have stimulated a sudden interest in CBDCs.

In the meantime, about one-half of Russia’s respondents are interested in digital rubles, and 20% opposed it, according to a survey by the Skolkovo tech hub for financial technology research and the digital economy.

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21% of Muscovites think crypto and digital currencies will replace fiat in ten years

New research from one of the top 10 major banks in Russia, Otkritie Bank, has found that 14% of Russians think crypto will replace fiat in 10 years.

According to Russian publication Nord News, the survey was conducted between April 12 and April 16, with a sample base of 1000 Russians aged between 18 to 65 who live in cities with a population of over 100,000.

The results varied between regions, with respondents from the Northwest having the least faith in crypto — just 8% believe crypto will oust fiat in a decade, while 34% adamantly refuse to believe that crypto could replace fiat currencies for any use case.

But in Moscow, there appears to be more optimism towards crypto, with 21% of respondents believing that cash will be replaced by crypto and digital currency in the next decade. Furthermore, four out of ten believe banks will transform themselves into “digital ecosystems” in the future.

One of the key factors in moving Russia away from cash could be the emergence of the Digital Ruble. Cointelegraph reported in March that the Bank of Russia expects a digital prototype of the Digital Ruble to be finalized by the end of 2021.

The Bank of Russia has announced the CBDC will then go into pilot trials in 2022. A previous study conducted by Otkritie in January found that 47% of Russian residents are already willing to use the Digital Ruble.

However, the latest poll also found that many Russians are pessimistic about the move to digital finance, with 39% convinced that it is impossible to give up cash because many other countries won’t be able to operate without it. It was also found that 46% of respondents believe that people should have the opportunity to choose if they use crypto or cash.

Some feel Russia’s regulations are holding crypto back from being more widely embraced. Earlier this month, a group of Russian lobbyists led by law firm Digital Rights Center launched the “Public initiative of the crypto community in Russia” campaign.

According to the lobby group, Russia’s existing laws such the prohibition of using crypto as a form of a payment, and issuing three-year jail terms for failure to report one’s holdings slows down “the development of the distributed finance market.”

It appears that Russian investors are doing their due diligence in regards to taxation however, with Cointelegraph reporting a significant rise of Russians declaring their crypto incomes over the past several months.