As Russia is struggling with international isolation over its war with Ukraine, the Russian parliament prepares to launch a central bank digital currency - the Digital Ruble, joining other countries to experiment with its electronic money.
Russia’s upper house of Parliament – the Federation Council – will vote for the regulatory framework to give the “thumbs up” for the creation of national digital currency.
To provide both consumers and businesses with digital wallets, the Bank of Russia is initiating a test program with 15 Russian institutions. Any Russian bank will have access to these wallets. According to the bank's recommendations, individuals can deal with the Digital Ruble at no cost, but businesses will be charged a 0.3% transaction fee.
Russia versus the world
Following the imposition of sanctions by the US and its allies, which cut off Russian banks from the global financial system, the Bank of Russia is pressing on with the CBDC initiative. Foreign banks have tightened their rules surrounding payments from Russia in reaction to these restrictions.
By strengthening its trade in national currencies with nations like China and India that have adopted a more neutral attitude toward the conflict, Russia hopes to lessen the impact of the sanctions. Nevertheless, Alexandra Prokopenko, a former adviser at the Russian central bank, said that those hopes might be overly optimistic at this point since the Digital Ruble would need to be connected to other countries' currency platforms for international transactions to take place.
“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”, Nikolay Zhuravlev, deputy chairman of the Federation Council, stated.
However, those hopes might be overly optimistic at this stage, according to Alexandra Prokopenko, a former adviser at the Russian central bank, as the Digital Ruble would need to be linked to other nations' currency platforms in order for international transactions to take place. However, there are currently no signs of movement in that direction.
The digital ruble, according to Prokopenko, "so far resembles a points system in the loyalty program of the "Fortress Russia" corporation," which could make domestic transactions easier. "It also possibly will make transactions more transparent in the territories annexed from Ukraine as everything is currently done through cash," he added.
In the past, Russia also intended to create a national cryptocurrency exchange to ease trade in cryptocurrencies. For the time being, they have given up on the strategy.