Bank of Russia Steps Up Efforts to Issue Digital Ruble Due to Sanctions

The Central Bank of Russia (CBR) has accelerated the development of its digital ruble in response to Western sanctions. The monetary authority now intends to pilot transactions with the new version of the national fiat in early 2023 instead of 2024, as originally planned.

Sanctions imposed over Moscow’s invasion of Ukraine have convinced the Bank of Russia to speed up the development of the digital version of the ruble, the Russian-language edition of Forbes reported, quoting CBR’s First Deputy Chairman Olga Skorobogatova. She revealed this during a meeting organized by the Association of Banks of Russia.

The high-ranking official remarked that Russia’s central bank had initially scheduled the digital ruble pilot with real transactions and users for 2024 but it has been decided to launch the project in April 2023. At the same time, the regulator also wants to start implementing smart contracts based on the digital ruble infrastructure.

Last spring, the Central Bank of Russia announced that the digital ruble’s prototype will be ready by the end of 2021 and devoted 2022 to trials with the participation of commercial banks. It started testing the platform in February of this year and announced the first successful transfers between individual wallets later that month.

The users were able to open digital ruble wallets through mobile apps, exchange regular electronic money from their bank accounts for digital rubles, and then transfer the coins between themselves, the CBR detailed. At the time, Skorobogatova assured that the digital currency transactions will be free of charge for all Russians and available in every region of the country.

A dozen Russian banks have so far applied to join the pilot group for the project and three of them have already connected their systems to the central bank digital currency (CBDC) platform. Two of the financial institutions have successfully completed a full cycle of digital ruble transfers between clients, the CBR revealed in its announcement.

Bank of Russia started testing the digital ruble amid disagreements with the Ministry of Finance over the future of cryptocurrencies in Russia. While the ministry wants them legalized and regulated, the monetary authority proposed a blanket ban on crypto-related activities. Discussions on the matter continue in Moscow but the central bank maintains its hardline stance, insisting the legalization of their circulation brings risks for the country’s financial stability and its citizens.

Forbes quotes Fitch analysts who expect the CBR to continue to advocate a prohibition of decentralized cryptocurrencies in order to make room for the development of its own digital currency. They also suggest that the emergence of a digital ruble could lead to an outflow of funds from deposits in the banking system, increased competition in the financial market, and rising interest rates.

Do you think Bank of Russia will manage to issue the digital ruble by April 2023? Tell us in the comments section below.