Russian Banks Set to Launch CBDC

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  • Russia is set to launch a digital ruble next week following President Vladimir Putin’s approval
  • The Central Bank will manage digital ruble accounts directly
  • Russia will become the largest CBDC adopter after China, drawing attention to the US dollar’s position in global finance

Russia is preparing to launch its digital ruble next week having received the blessing of President Vladimir Putin last week. Russia’s Civil Code will be amended to permit the use of the digital ruble for payments, with the country’s central bank allowing citizens to start using the currency from August 1. The move marks a huge step for Central Bank Digital Currencies (CBDCs) with Russia becoming the second most populous country after China to get to a nationwide adoption level.

From Discussion to Rollout in Under Three Years

The idea of a digital ruble was first explored by the Russian government in October 2020, which shows how quickly things have moved in the state. The system was first piloted by Russian banks in February 2022, with final testing taking place recently following the adoption of the requisite regulatory framework. Recently, the State Duma approved a new law allowing individuals to use the digital ruble for transactions.

The currency will have programmable features, including transaction limits and restrictions on spending, which has drawn criticism from politicians in Western countries like the United States and Canada. In contrast, Putin and the Russian parliament have already banned the use of private cryptocurrencies for domestic payments, permitting their use solely for cross-border trade.

Russia and China Leaving U.S. Behind

Elvira Nabiullina, the governor of the central bank, emphasized that the use of the digital ruble is optional, hoping that it will offer greater convenience and cost-effectiveness for both individuals and businesses, although critics have noted the potential for it to be used to spy on citizens’ spending.

China is the biggest current adopter of CBDCs in terms of population, but Russia’s adoption would make it the second biggest user of digital currencies. The move will add further weight to the argument that the U.S. risks being left behind in the financial stakes and the dollar losing its prowess as other countries work out how to do digital deals that negate it.