Digital Ruble to Give Russians What They Need, Bank of Russia Governor Says – Finance Bitcoin News

Elvira Nabiullina from Bank of Russia stated that digital rubles are what Russian citizens require to facilitate reliable, inexpensive payments. He also cautioned that fiat-backed stabilitycoins and cryptocurrencies pose risks to financial stability.

CBR’s Nabiullina Praises Digital Ruble Concept, Rejects Cryptocurrencies

The Central Bank of Russia (CBR) takes very seriously cryptocurrencies and stablecoins as they pose risks to the financial stability of the country, the head of the monetary authority said during a conference organized by Bank of Finland’s Institute for Emerging Economies. Russia is cautious about these two types of private tokens. Elvira Nabiullina, head of the Central Bank of Russia (CBR), shared the Russian view via video chat with an audience.

Nabiullina explained how the entrance of cryptocurrencies and even global stablecoins to emerging markets might increase currency substitute, making fiat currencies less competitive. As a result, financial stability risks may increase while the monetary transmission mechanism may weaken, the high-ranking official added during her presentation devoted to Russia’s digital ruble project. She also stressed:

That’s why we think that CBDC is the proper solution to give people what they need – a cheap, reliable, and protecting personal data solution for payments.

An executive noted that the Russian Bank of Russia doesn’t allow private cryptocurrency to be used in its payment system. Her statement reiterated the regulator’s long-standing position against permitting the free circulation of bitcoin and the like, which it often calls “money surrogates.” The central bank maintains that under current Russian law the ruble is the only legal tender.

Elvira Nubianullina explained that digital rubles, third form of national fiat money after cash and bank currency, will have legal tender status. This means merchants will need to be able to accept them. Russian Federation plans to launch the prototype and adopt the required legislation. It will also begin trial operations with other institutions and commercial banks.

CBR chair described the CBR’s transition to CBDCs in a positive light. In her opinion, the state-issued digital currencies will facilitate more advanced, as well as cheaper — which is important for Russia — payment solutions. Nabiullina stated that they will simplify and speed up cross-border transactions over the long term.

Bank of Russia considered a CBDC since 2018. After analyzing all the options, the bank decided that it would be worth exploring the possibility of issuing a digital currency. In October, a consultation paper with many questions was released to solicit feedback from financial industry and other stakeholders. In April, the authority released a digital ruble concept outlining the CBDC’s principle architecture.

CBDC Wallets will be linked to the identities and holders

The digital ruble will be a retail CBDC and all individual wallets will be opened on Bank of Russia’s balance sheet and on a centralized ledger operated by the CBR. Commercial banks and other financial intermediaries will provide access to customers’ wallets through their apps. Nabiullina explained that anonymity in cash is not possible because of anti-money laundering regulations.

Also, we must remember that anonymity also means greater vulnerability to all types of fraud.

“The digital ruble wallets will be linked to the identities of their owners, thus from the standpoint of access mechanics, this clearly fits in the definition of an account-based system,” as opposed to a token-based solution where the formula involves knowing the key to an anonymous account, the central banker detailed. However, the wallets will allow currency tokenization.

According to the CBR official, there’s a strong consensus that the design of the digital ruble should put an emphasis on its use as a medium of exchange while limiting its appeal as a savings vehicle. “With that in mind, the Bank of Russia made the definitive decision that the digital ruble will not be interest-bearing” in order to avoid competition with bank money in the savings space, Nabiullina revealed. At the same time, she believes the digital fiat will challenge the banking sector’s monopoly on electronic payments, leading to lower commissions and higher interest payments.

To avoid bank runs, imposing a limit on the amount a person can transfer from a regular bank account to a digital ruble account “may be advisable,” the governor stated. You could also limit the number of digital ruble funds you can store in your wallet.

Elvira Nabiullina expects a prototype of the digital ruble platform to be available at the beginning of next year and piloting to commence later in 2022 to “test and refine all aspects of using the digital ruble.” Once the pilot phase is completed, financial authorities in Russia will take a final decision on the launch of the digital ruble.

Is Russia likely to issue a digital copy of its ruble in the future? Let us know your thoughts in the comment section.

In this story, tags
Bank of Russia. Bitcoin. CBDC. CBDCs. Central Bank. Elvira Nabiullina. Fiat. Financial stability. Governor. money. money surrogates. Nabiullina. Payments. ruby, Russia. Stablecoins.

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