Yesterday, Russia central bank announced that testing of the digital ruble, i.e. the Russian CBDC, will be carried out by 13 banks and a small group of their customers.
The official statement says that during the first phase of this pilot project, they will process basic transactions such as opening bank accounts in digital rubles with digital wallets, deposits, transfers between citizens, automatic payments, and payments for purchases and services via QR codes.
Tests on digital ruble payments will take place in only 30 outlets located in 11 Russian cities.
By the end of 2023, however, the list of participants in the pilot project will be expanded.
Next year, dynamic QR code payments, and transfers between legal entities, will also be introduced.
The CBDC of Russia
CBDCs (Central Bank Digital Currencies) are nothing more than natively digital versions of classic fiat currencies issued by central banks.
In other words, they are the exact same currencies that citizens are already accustomed to using, issued and managed by central banks, but in a natively digital format. In contrast, traditional fiat currencies natively have a physical, metallic or paper format, but are also exchangeable in digital format.
Russia’s national fiat currency is the ruble, and its natively digital version has been called simply the digital ruble.
Truth be told, the digital ruble project had already been announced in 2021, but perhaps due to the war in Ukraine it had then also been postponed.
In April 2022 the Russian authorities declared that they were ready to issue their CBDC, but so far there has been nothing concrete.
According to the latest declarations, by the end of 2023, tests of real, concrete use of the digital ruble should actually begin, albeit to a very limited extent.
The comment on the pilot project
The First Deputy Governor of the Bank of Russia, Olga Skorobogatova, said:
“The launch of pilot operations with real digital rubles is the most important stage of the project. This will allow us to test the operation of the digital ruble platform already in an industrial environment, work out all the necessary procedures with the involvement of clients, adjust processes, if necessary, and make sure that the client path is convenient and understandable for users
We plan to introduce the digital ruble into mass circulation based on the results of gradual testing and subject to the successful completion of the testing of all scenarios for digital ruble operations. We expect that from 2025 citizens and businesses will be able to actively use the national digital currency, obviously at their request.”
Thus 2024 will be the year of testing and possible corrections, with the goal of launching the digital ruble on the markets the following year.
The usefulness of CDBCs
From the citizen’s point of view, there should be no substantial differences in the use of CBDCs compared to digital versions of traditional fiat currencies.
The only real change could possibly be in their use through smart contracts, i.e., computer programs capable of autonomously executing money transactions. At present, there do not seem to be any plans for such a development regarding the digital ruble any time soon.
A different situation applies to central banks and government authorities, since CBDCs can provide authorities with a far higher level of monitoring, which is much more precise and timely.
In authoritarian regimes such as that of Russia, the ability to increase the level of control over citizens’ money flows turns out to be particularly valued, so much so that in other countries with greater freedoms, CBDCs are the subject of contestation if not outright political opposition in some cases.
On the other hand, it should be remembered that stablecoins guarantee not only almost total incensurability, but also a level of anonymity that can even be relatively high.