Two banks have completed a cycle of digital ruble transfers between individuals in a successful start to central bank digital currency (CBDC) testing in the country, the Bank of Russia has announced.
Russia’s central bank announced seven months ago that initially 12 banks would be involved in initial testing of a CBDC, describing the dozen as the ‘first pilot group for testing the digital ruble’ and saying that testing would happen over ‘several stages’ during 2022.
The creation of a prototype digital ruble platform was completed a couple of months ago and three banks from the pilot group have so far connected to it, the Bank of Russia said this week in an update that also provided details on its aspirations as experimentation progresses.
Two of the banks have completed a full cycle of digital ruble transfers between customers using mobile banking apps, according to the central bank’s ‘Digital ruble: start of testing’ statement. ‘In addition to opening digital wallets on the digital ruble platform, clients were also able to exchange non-cash rubles in their accounts for digital ones, and then they transferred digital rubles between themselves,’ the announcement continued.
The central bank added that further members of the 12-strong piloting banks are primed to join the platform trials ‘as soon as their IT systems are finalised’. Banks involved include state-owned giant Sberbank and digital bank Tinkoff.
Plans for testing’s second stage
The Bank of Russia said 10 months ago that its ‘selected target model’ was to use a two-tier system through which it would use commercial banks to distribute digital rubles to users’ e-wallets. In an announcement entitled ‘Bank of Russia presents Digital Ruble Concept’ the central bank explained that other nations’ CBDC research and experimentation showed such a model to be ‘most preferable in terms of both innovations and stability in the financial market’.
The first stage of its trial includes the opening of digital wallets by banks and households, as well as transfers between individuals.
At the second stage of CBDC experimentation, it is planned to test payments for goods and services at retail and ‘service companies’, payments for public services, sales of ‘smart contracts’, as well as interaction with the Federal Treasury. Smart contracts are self-executing contracts that have terms of agreement between buyer and seller directly written into lines of code.
After this, the central bank states that ‘it is suggested to introduce the possibility of making payments in places without access to the internet (offline mode), set up interaction with financial intermediaries and digital platforms, and also provide for the possibility of conducting transactions with digital rubles for non-resident clients’.
It adds that a roadmap for the digital ruble platform’s implementation will be complied. Legislation for full issuance is needed.
‘New tool’ for state payments
“The digital ruble platform provides new opportunities for citizens, businesses and the state,” Bank of Russia first deputy governor Olga Skorobogatova said this week. “We plan that transfers in digital rubles will be free of charge and available in all Russian regions for households, whereas for businesses – these will reduce costs and enable the elaboration of innovative products and services. As for the state, these transfers will serve as a new tool for earmarked payments and for budget payment administration.”
“During this year, we will test various scenarios and finalise the digital ruble platform,” Skorobogatova continued. “At further stages of the platform development, we are also going to ensure a seamless interaction with digital platforms and digital ecosystems.”
The other banks in the pilot dozen are: Ak Bars Bank, Alfa Bank, DOM.RF, VTB Bank, Gazprombank, Promsvyazbank, Rosbank, SKB-Bank, Bank Soyuz and TKB Bank.
The Bank for International Settlements (BIS) presented its recommended approach to fundamental elements of CBDC design in June last year, stating that CBDCs would best function as part of a two-tier system where the central bank and the private sector ‘work together to do what each does well’.
The Federal Reserve Bank of Boston and Massachusetts Institute of Technology’s (MIT) Digital Currency Initiative (DCI) have just published initial findings of multi-stage research into central bank digital currency (CBDC) technology that describes CBDC design choices are ‘more granular than commonly assumed’. Its report describes typical CBDC design categorisations as ‘insufficient to surface the complexity of choices in access, intermediation, institutional roles and data retention in CBDC design’.
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‘Russian central bank presents ‘digital ruble’ update’ – our news story (11 April 2021) on Russia’s central bank issuing an update on the potential launch of a digital currency, with testing planned during 2022
‘Russia consults on ‘digital ruble’ ahead of potential 2021 pilot’ – our news story (27 October 2020) on the Bank of Russia launching a public consultation on a central bank digital currency (CBDC) ahead of a possible ‘digital ruble’ pilot before the end of next year