CBDC in Russia: The pilot project of the digital ruble could see the light as early as 2025

The governor of the Central Bank of Russia, Elvira Nabiullina, said that the mass use of the digital ruble, Russia’s CBDC, will take five to seven years. 

The local newspaper pnp.ru reports this, citing a joint meeting of the State Duma committees as reported by RIA Novosti.

However, the start of the work, after the results of the pilot project, should already take place next year, although for mass use Nabiullina argues that it will take at least five to seven years. 

The governor of the Bank of Russia also stated that the pilot project will be expanded, and based on its results, the timing for the launch of the digital ruble will be determined.

Even the president of the State Duma’s financial market committee, Anatoly Aksakov, as reported by Parlamentskaya Gazeta, stated that the launch process of the digital ruble will begin next year, and by 2026 it will already be possible to pay for some goods and services.

The digital ruble, Russia’s pilot project for its own CBDC

The digital ruble will be Russia’s CBDC, i.e. its native digital fiat currency.

It will have the same value as the traditional ruble, and will be convertible on a one-to-one basis with it. 

However, it will be based on a new computer system that in some ways could also resemble DLT (Distributed Ledgers Technology), although at present there does not seem to be any evidence to suggest that it will actually be based on a distributed and not centralized ledger. 

Actually, given the authoritarian government of Russia, it is very likely that the central bank will be the only one to completely and exclusively manage the transaction registry. 

It is worth noting that in China the pilot project of their CBDC, the digital yuan, started in 2021, and in fact the following year some Chinese people began to be able to use it.

Two years have passed since then, but it does not appear that the use of digital yuan has spread in the country. 

In Russia, the timing could be similar, that is the launch of the pilot project of the digital ruble in 2025, the possibility to start using it in 2026, but several more years for its widespread use. 

Nabuillina emphasized that it will be a long and natural process, because the choices of individuals and companies will be crucial, since the digital ruble must be convenient for them to start using it on a large scale. 

Doubts about CBDCs

The governor of the Russian central bank has rightly highlighted the concept that for the mass adoption of CBDCs, they must be convenient for users, i.e. be more useful to them than traditional currencies in electronic format. 

There are strong doubts on this point, so much so that in China it seems that not even two years have been enough for citizens and companies to realize that the use of a CBDC (Central Bank Digital Currency) could be useful to them. 

Indeed, in authoritarian regimes like China and Russia, citizens may instead find it convenient not to use CBDCs, precisely because central banks would have access to all transactions. 

In other words, not only could they easily and quickly freeze the funds of those who are considered enemies of the regime, or even just suspected of being so, but they could even spy on every single transaction of every single citizen, since CBDCs cannot be used without KYC.

All CBDC wallets require identity verification, unless exceptions are made for small amounts, or wallets without KYC are authorized. 

The lack of success of the digital yuan could be due precisely to the fact that Chinese citizens do not like the idea that the regime could know all their financial movements, or because they fear that the same regime could easily block their funds.

CBDC and cryptocurrencies

From a technical point of view, CBDCs and cryptocurrencies are definitely different.

They only have in common the fact of being both native digital currencies, even though CBDCs draw inspiration from blockchain-based cryptocurrencies and DLTs. 

True cryptocurrencies, like Bitcoin, are decentralized, uncensorable, immutable, and effectively not controlled by anyone, all characteristics that CBDCs do not have and realistically cannot have. 

Cryptocurrencies are used to take money out of the hands of states, while CBDCs do the exact opposite. 

Furthermore, true cryptocurrencies are a symbol of financial freedom, while CBDCs inevitably reduce it.

At the moment, there doesn’t seem to be any highly successful CBDC in the world, while Bitcoin, for example, is even entering all traditional financial markets (where CBDCs are not yet present).

Perhaps it is not a coincidence that it is precisely two authoritarian countries that are pushing the most in the direction of CBDCs, since the goal of their respective regimes is probably to increase their control over the financial transactions of their citizens.