The digitalisation of the economy and the development of financial technologies generate public demand for new, advanced payment methods.
The arrival of new financial opportunities for businesses and households that meet the demands of the digital world boosts the competitiveness of the economy in general. Thus, the Bank of Russia is considering the possibility to issue its central bank digital currency (CBDC), a digital ruble, as part of its objective to develop the national payment system.
What is a digital ruble?
A digital ruble is an additional form of the Russian national currency that will be issued digitally by the Bank of Russia. A digital ruble will have combined characteristics of both cash and non-cash rubles.
Same as cash, it will be possible to use a digital ruble offline, i.e. without an access to the internet. On the other hand, its digital form allows using a digital ruble for online payments, just like cashless means of payment.
All economic agents, including individuals, businesses, financial markets participants and the government, will have access to a digital ruble. Just like cash and non-cash rubles, a digital ruble will perform all three functions of money: it will act as a means of payment, a measure of value and a store of value. All three forms of the Russian ruble will be absolutely equal: as one cash ruble equals one non-cash ruble, one digital ruble will always equal each one of them.
Why do we need a digital ruble?
A digital ruble can make payments faster, simpler and safer. The development of digital payments along with an equal access to a digital ruble for all economic agents will reduce the cost of payment services and remittances and promote competition among financial institutions. This will stimulate innovations both in retail payments and in other areas and support the development of the digital economy. At the same time, the decreased dependence of users on individual providers will help increase the financial system’s stability.
What other benefits are there?
Cashless payments share has been growing over the recent years. A digital ruble can become a new and convenient additional means of payments for both buyers and sellers, including in remote, sparsely populated and hard-to-reach territories with limited access to financial infrastructure. A digital ruble will help expand the coverage of households with financial services making them more accessible, which will improve people’s quality of life.
The domestic digital currency will also mitigate the risk of reallocation of funds into foreign digital currencies, thus contributing to the macroeconomic and financial stability.
How operations with a digital ruble could be organised?
For individuals, operations with a digital ruble may be similar to using electronic wallets, payment or mobile apps. Transactions involving a digital ruble may be made both online and offline. For offline operations, when a network connection is unavailable, it will be possible to reserve a certain amount in digital rubles in one’s electronic wallet, just like these days people take cash with them when they visit places where bank cards may be useless. When a connection is present, operations will be performed similar to cashless payments.
Will a digital ruble replace cash?
No. A digital ruble is not considered as a replacement for cash or non-cash rubles; it is viewed as an addition to these common and convenient forms of money.
For what purposes and how will it be possible to use digital rubles?
Same as cash and non-cash rubles, it will be possible to use digital rubles to pay for goods and services, make payments to organisations and the state, make funds transfers, pay for transactions with financial instruments and digital financial assets.
Funds in digital ruble accounts will be replenished from a bank account or a bank card as well as with cash. All forms of rubles (cash, non-cash, digital) will be transferable into each other.
Why a digital ruble is not a cryptocurrency
Cryptocurrencies are totally different from central bank money. Cryptocurrencies do not have a single issuing authority; they do not guarantee a protection of consumer rights; their value is subject to significant volatility; it is illegal to use them to pay for goods and services in most countries; and they usually lack a single institution that would ensure their safety.
A digital ruble is a central bank liability; it is implemented through the use of digital technologies and is not related to cryptocurrencies in any way. It is a fiat currency whose stability is ensured by the state represented by the central bank.
When will a digital ruble be introduced?
The Bank of Russia yet has not made a decision on whether to introduce a digital ruble. The consultation paper ‘A Digital Ruble’ outlines potential ways to implement this decision and the corresponding functional requirements. Due to the fact that introduction of a digital ruble will become a major event for the economy and society, the Bank of Russia believes that it is crucial to discuss the key aspects, benefits, potential risks, milestones and timeframes for the implementation of the digital ruble project with financial market participants, experts and the general public.