Bank of Russia Boosts Digital Ruble Efforts Due to Sanctions

Sanctions imposed by the West due to the Russian invasion of Ukraine have prompted the Central Bank of Russia (CBR) to speed up its efforts where the development of their central bank digital currency (CBDC) is concerned. Originally, the monetary authority had been planning on conducting pilot transactions of the digital ruble in the start of 2024, but it has now changed its schedule and brought it to the start of 2023 instead. This is primarily because of the sanctions that Moscow has had to deal with due to its military invasion of Ukraine. Olga Skorobogatova, the First Deputy Chairman of the FBR, disclosed their decision to do so.

The Association of the Banks of Russia had organized a meeting where the high-ranking official revealed that initially, the Russian central bank had been planning on launching actual transactions of the digital Ruble in 2024. But, now they have reconsidered and have decided to begin their pilot program in April 2023. Moreover, she also said that the regulatory authority is also interested in introducing smart contracts that are based on the infrastructure of the digital ruble. The Central Bank of Russia had announced the previous spring that they would have a digital ruble prototype prepared by the end of 2021.

It also said that they would be conducing trials throughout 2022 and a number of commercial banks would participate in them. The testing of the platform began back in February and the Russian central bank said that they transfers had been successfully made between individual wallets. Users had been able to use their mobile apps for opening digital ruble wallets. They had been able to exchange their fiat money for digital rubles from their bank accounts and had then transferred the digital currency between each other. Skorobogatova had said back then that there would be no charges associated with the digital currency transactions and they would be available throughout Russia.

A number of banks in Russians have applied to be part of the pilot program and three of them have already integrated the CBDC platform into their system. The announcement from the CBR revealed that two of the banks had already completed digital ruble transfers successfully between their customers. Testing for the digital ruble had been initiated by the Bank of Russia amidst its ongoing disagreement with the Ministry of Finance about the future of crypto in the country. The Ministry is interested in legalizing and regulating cryptocurrencies, while the monetary authority wants to impose a complete ban on them.

While the discussions over this disagreement are ongoing, the central bank has not changed its stance because it believes that cryptocurrencies pose a significant threat to the financial stability of the country. Many believe that the bank is opposed to decentralized currencies because it wants space for developing its own CBDC. There have also been predictions that the launch of a digital ruble could lead to higher interest rates, additional competition in the market and funds deposited in the banking system could also decline.

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