Russia’s Digital Ruble Schedules August Testing, Awaits Putin’s Assent
Russia is joining the jurisdictions adopting central bank digital currency (CBDC), with the test phase due in a few weeks. The announcement of testing the digital Ruble comes following the bill’s passing that grants legal authority to the country’s central bank.
Federal Council Approves CBDC Bill
The journey to Russia’s CBDCs is edging closer to reality as the country awaits President Vladimir Putin’s veto following its passing by the Federation Council on Wednesday, July 19. The bill received little to no opposition following the rigorous process and debate at the State Duma early this month.
The bill will become law, with President Putin likely to append the signature. Its signing would facilitate the CBDC tests starting on August 1. In particular, the bill grants authority to the central bank as the platform operator for the CBDC. The bill captures legal definitions of the operation of accounts and users.
The rushed nature of unveiling the digital Ruble arises from the awareness that Russia’s economy is struggling following the sanctions imposed by the US and its Western allies. The sanctions are termed efforts to arm-twist Russia to end the war against Ukraine.
The approval of the bill by the Federal Council is timely considering that Russia’s Ruble appears battered by the Western sanctions, hence eroding its value.
Russia’s Digital Ruble Restricts Scope to Payments and Transfers
The bill allows the Russians to settle payments and transfers using digital wallets. The wallets would be hosted within the central bank’s platform or in partner banks. The latter will involve banks working alongside the Central Bank under its supervision.
The bill grants a limited scope to Russia’s CBDC in facilitating payments and transfers. As such, the central bank ruled out the digital ruble use in lending and deposits.
The ascension of the bill into law would propel Russia’s CBDC to the milestone realized by Japan and China. The two Asian countries recently unveiled their pilot CBDCs.
Surprisingly, the United States is yet to move past the research phase. Nonetheless, in their recent statements, the Biden administration, legislators, and the Federal Reserve have admitted the continued deliberation to assess the implications of the digital dollar.
CBDC Centralized Nature Raising Privacy Concerns
Unlike Bitcoin, the central bank’s digital currency runs as a centralized token. Its design mirrors the stablecoins, whose value is pegged to a unit of national fiat currency.
Parties opposed to CBDCs dismiss their viability as they cite major privacy risks. They decry that the centralized nature leaves CBDC vulnerable to the government’s visibility into private transactions.
The digital Ruble is considered the poster child Russia would utilize for mass surveillance. The central bank executive Elvira Nabiullina admitted that the platform operator would consider privacy rights. However, parties transacting using digital Ruble ruled out it would guarantee anonymity supported via cash-based transactions.
Russia to Leverage CBDC to Wrestle Challenges Facing Ruble
Russia’s Ruble has witnessed a deteriorating exchange rate despite repulsing double-digit hikes at the onset of the Ukraine war. Its exchange rate is plunging to the current rate of 91 rubles to USD.
The move by Russian legislators to approve the bill authorizing digital rubble is aligned with the argument that CBDC would become a hedge against volatile currencies. Such potential would suit its unveiling, considering Russia’s Ruble is among the worst-performing currencies. Rising inflation fuelled by Western sanctions batters the currency.
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