Russia’s central bank has announced that 12 banks will be involved in initial testing of a central bank digital currency (CBDC).
The Bank of Russia describes the dozen banks as the ‘first pilot group for testing the digital ruble’, adding that testing will be done in ‘several stages’ during 2022.
The 12 banks, which include state-owned giant Sberbank and digital bank Tinkoff, will work to a development timetable that sets December 2021 as the target date for the creation of a prototype platform and January 2022 to start testing.
After the first stage, further participants will be added to the pilot programme, according to the central bank’s statement. Development of legislation for the implementation of the digital ruble is scheduled for 2022.
‘Need to ensure seamless migration’
The Bank of Russia set out its thinking on a CBDC in April, stating 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 retail (or general purpose) CBDC is one issued for public use, while a wholesale CBDC is for inter-bank purposes. 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 on the Bank of Russia website.
‘A digital ruble project is aimed to create new payment infrastructure to improve the availability of payments and transfers and to reduce their cost for households and businesses,’ said Bank of Russia first deputy governor Olga Skorobogatova in the new update, which was issued on 29 June.
‘For the convenience of its use, we need to ensure a seamless migration between the forms of the ruble. This is why it is highly important for us to co-operate with market participants at all stages of the pilot project. To organise this co-operation, we have promptly formed the first pilot group of banks for them to have enough time to technically and technologically prepare their systems and processes for piloting,’ she added.
The further 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.
Public and private in partnership
The Bank for International Settlements (BIS) has just set out its recommended approach to fundamental elements of CBDC design, 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’.
Central banks would operate the system’s core, ensuring its safety and efficiency, while the private sector, such as banks and payment service providers, innovate and actually serve customers, BIS stated, adding that precisely where the line is drawn between organisations’ respective roles would depend on data governance and the capacity for regulation of payment service providers (PSPs).
BIS’s verdict, which set out a preference for account-based CBDC systems built on digital ID, was published on 23 June in a 32-page CBDC-focused chapter of its Annual Economic Report for 2021.
Sweden’s central bank, the Riksbank, recently engaged one of the country’s biggest commercial banks (Handelsbanken), as well as a Nordic IT services provider (TietoEVRY), as part of its own testing for a potential Sweden CBDC.
FURTHER READING
=>>> Global Government Fintech’s dedicated ‘Digital Currencies’ section <==
‘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
INTERESTED IN THE TECHNOLOGY BEHIND CBDCs? WATCH THIS =>
Global Government Fintech organised an international webinar, in partnership with Amazon Web Services Institute (AWSI), entitled ‘Delivering Central Bank Digital Currencies (CBDCs): Exploring the Technology Challenge’ on 22 April.
