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- The Central Bank of Russia plans to launch its Digital Ruble by early next year
- A prototype for the same will be in place by the end of 2021 to gauge its efficiency
- It puts CBDC in direct competition with other banks in the country, posing serious threats and concerns
The Bank of Russia has officially declared that it will release a prototype of its digital ruble through the Central Bank Digital Currency (CBDC) program that was launched in October 2020. Over a poll conducted, 83% of respondents were in favor of a digital currency. Russia does not recognize any digital currency at this point in time, including Bitcoin. However, SberBank, the country’s largest bank, is testing the possibility of going ahead with its own digital coin and token. It might include a trading platform as well.
Russia’s two-tier CBDC program
The Central Bank of Russia came under a scathing attack from experts who believed that a digital currency would lead to direct competition between banks and the new age currency. Keeping aside all the chatter, the bank launched a two-tier retail model for its currency wherein it acts as the issuer of the digital currency and the platform that it would soon operate.
Financial institutions will have to open digital wallets for end retail customers on the digital ruble platform. Normal citizens will have access to their digital currency through any bank they have an account in. By late December, the prototype will be in use, and its efficacy will be gauged. It will only be until next year that the central agency plans actually to start issuing digital currency.
Central banks should start issuing digital currency
A lot of experts have questioned the safety of electronic money and that fiat currency ranks higher on the safety levels. They fail to understand that the central digital currency will help mitigate liquidity risks and credit risks across all verticals. Furthermore, it widens the range for advocating a countries’ monetary policy according to the target price stability.
It will thrive on positive competition with the central bank. Smaller financial institutions will stand to gain as they would see a decline in transaction fees. It may help address issues such as the decline of physical cash and be more financially inclusive in all aspects.
CBDCs future goals will soon be met
The regulating authority plans to make digital payments available offline across all platforms. It has streamlined all resources and projects towards a viable technological innovation that can help smoothen the process offline. Soon, users will run offline as well as online accounts for faster transferability.
One of the major concerns of a central digital currency would entail liquidity issues that arise due to people pulling out their money from bank accounts. The markets might take a hit due to the price impact due to the ‘mega project’. The centralized form of the CBDC is being questioned as a potential risk to end-users. It would juxtapose the role of commercial banks and put them in direct competition with the digital currency issuing authority.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
