Russia’s central bank has issued an update on the potential launch of a digital currency, with testing planned during 2022.
The Bank of Russia presented details of what it refers to as its digital ruble ‘concept’ following feedback from a consultation launched in October last year.
The central bank says that a Russian retail CBDC would most likely operate by a two-tier system through which it would use commercial banks to distribute digital rubles to users’ e-wallets.
A general purpose (or retail) CBDC is one issued for public use, while a wholesale CBDC is for financial institutions that hold reserve deposits with a central bank. Other nations’ research and experimentation demonstrate that a two-tier retail model is ‘most preferable in terms of both innovations and stability in the financial market’, according to an English-language statement posted on the Bank of Russia website.
December 2021 has been set as the target date for the creation of a prototype platform, with January 2022 the target date for the ‘development of amendments to legislation’. Testing of the prototype platform would begin during the first quarter of 2022. An implementation roadmap would depend on the test results.
E-wallet limits under consideration
The introduction of a digital ruble would help reduce costs for households and businesses, increase payments’ speed, and aid the development of innovative products in financial services and the overall economy, the central bank says.
Risks to financial stability are, it says, ‘minimal’ and the Bank of Russia will ‘consider’ the use of limit mechanisms for e-wallet holders. It adds that the impact of a potential digital ruble on credit institutions’ balance sheets will be ‘slow and controlled’, with the Bank of Russia ‘compensating in full for the possible outflow of liquidity’.
The central bank says that a digital ruble ‘will lead to increased financial stability through the creation of additional payment infrastructure’ in the long term.
Eighty-eight per cent of the 196 respondents to the consultation were in favour of payments being enabled when digital devices are offline (‘offline capability’).
China ahead of US and eurozone
Most central banks worldwide are stepping up their research into CBDCs but few have committed to introduce them. China is a frontrunner with its digital yuan experimentation. However, the United States has adopted a relatively cautious approach to a potential digital dollar.
Within Europe, the European Central Bank’s president Christine Lagarde recently told Bloomberg TV that the institution’s governing council will decide in the middle of this year whether to green light practical experimentation towards a potential European CBDC and that a digital euro could come into being in about four years or “maybe a little more”.
The Bank of Russia’s CBDC consultation was presented over 48 pages (in Russian; also summarised in English). First deputy governor Olga Skorobogatova and deputy governor Alexei Zabotkin presented the central bank’s update at a (virtual) press conference on 8 April (an 11-page Russian-language pdf presented by the duo is published online).
WATCH ‘The digital ruble concept: press conference by Olga Skorobogatova and Alexei Zabotkin’ on 8 April 2021 (01:05:10; Russian language)
Credit: Банк России (via YouTube)
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