As Russia faces international isolation due to its war with Ukraine, the country is preparing to introduce the digital ruble and join other countries in experimenting with its electronic money.
On Wednesday, July 19, Russia’s upper house of parliament – the Federation Council – will pass legislation to authorize the creation of national digital currencies. Once the legislation is signed into law by President Vladimir Putin, the Bank of Russia will likely start testing the Digital Ruble CBDC as early as next month.
The Bank of Russia is launching a pilot program with 15 Russian banks to offer digital wallets to individuals and businesses. These wallets can be accessed through any Russian bank. Individuals can transact with the digital ruble for free, while businesses are charged a 0.3% transaction fee according to the bank’s guidelines.
Fighting economic challenges with digital ruble
The Bank of Russia is moving ahead with the CBDC project after the implementation of sanctions by the US and its allies, which have disconnected Russian banks from the global financial system. In response to these sanctions, foreign banks have introduced stricter policies regarding payments from Russia.
As a result, Russia is looking to lessen the impact of sanctions by increasing trade in domestic currency with countries like China and India, which have taken a more neutral stance on the conflict. Earlier this month Nikolay Zhuravlev, Deputy Chairman of the Federation Council, said:
“In the current environment, it is important to have independent payment instruments and financial information channels that can be used in our trade with foreign partners.”
However, Alexandra Prokopenko, a former adviser at Russia’s central bank, said those expectations may be too optimistic at this point, as for the digital ruble to take place internationally, it needs to be connected to other countries’ currency platforms. However, there is no indication of progress in that direction at this time.
Prokopenko said: “So far, the digital ruble resembles a points system in the company’s ‘Fortress Russia’ loyalty program”, potentially making transactions in the country easier. “It will also potentially make transactions more transparent in the territories annexed from Ukraine, as everything is now done in cash.”
Earlier, Russia also planned to establish a national crypto exchange to facilitate crypto trading. However, they have abandoned the plan for now.
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