The Bank of Russia has launched a public consultation on a central bank digital currency (CBDC) ahead of a possible ‘digital ruble’ pilot before the end of next year.
In launching the consultation, Russia becomes the latest major nation to set out publicly its thinking on a state-backed digital currency. China is seen as frontrunner among leading economies to launch a CBDC (a ‘digital yuan’), while the European Central Bank (ECB) is running its own consultation on a potential ‘digital euro’.
The bank could run a pilot with a “limited number” of users before the end of 2021, bank governor Elvira Nabiullina said, according to a report by Russian news agency TASS.
Digital ruble would become ‘major event’
‘Due to the fact that introduction of a digital ruble will become a major event for the economy and society, the Bank of Russia believes that it is crucial to discuss the key aspects, benefits, potential risks, milestones and timeframes for the implementation of the digital ruble project with financial market participants, experts and the general public,’ the Bank of Russia’s English-language document says.
The bank’s consultation – which will run until the end of December – emphasises that no decision has been taken to introduce a digital ruble, saying that it is premature to specify a ‘definitive timeline for its launch’. But, like many other central banks, the Bank of Russia believes the possibility requires an ‘extensive and deep’ study ‘in terms of both economic and technological implications’.
Nabiullina said a pilot would be “possible somewhere by the end of next year”, according to TASS. The news agency’s report added that, in answering a question at a virtual press conference about ‘how real’ the possibility is of a digital ruble in the near future, Nabiullina said: “It is quite real.”
Potential to reach Russia’s remote regions
In an English-language Q&A on the consultation, the Bank of Russia explains that with cashless payments growing in popularity, a digital ruble ‘can become a new and convenient additional means of payments for both buyers and sellers, including in remote, sparsely populated and hard-to-reach territories with limited access to financial infrastructure’. It adds that a digital ruble ‘will help expand the coverage of households with financial services making them more accessible, which will improve people’s quality of life’.
It also adds that a domestic digital currency ‘will also mitigate the risk of reallocation of funds into foreign digital currencies, thus contributing to the macro-economic and financial stability’.
Global Government Fintech recently reported that a group of major central banks had agreed on what they described as the ‘foundational principles’ required for any publicly available CBDC. ‘Central bank digital currencies: foundational principles and core features’ was published by the Bank of England, Bank of Canada, Bank of Japan, US Federal Reserve, Sveriges Riksbank (Sweden) and Swiss National Bank, as well as the ECB and Basel-headquartered Bank for International Settlements (BIS).
The ECB plans to decide whether to progress a potential ‘digital euro project’ by mid-2021.
Benoît Cœuré, head of the BIS Innovation Hub, was recently asked whether there was ‘first-mover advantage’ in respect of CBDCs. He said: “It’s not an international race. But there is an advantage to moving quickly because the private sector is moving quickly. The private sector is ahead of us in many aspects of digitalising payments and the COVID-19 crisis has accelerated this change. It’s very important that central banks can be part of the evolution so they can continue to do what citizens expect them to do.”