This digital innovation could allow a crucial modernization of the Russian monetary system, while Russia is oppressed by international sanctions. The digital rouble, version 2.0 of the country’s traditional currency, will be tested for the first time with individuals and businesses starting this Tuesday, August 15, after being approved and enshrined in legislation by the Federation Council mi -July, then introduced to 15 banks.
The project of a digital currency managed by the State had been thought of in 2014 by the Russian Central Bank (BCR), during the annexation of Crimea, in reaction to the first economic sanctions of the international community. But those taken against Moscow for more than a year after its invasion of Ukraine, much larger than the previous ones, seem to have precipitated the development of this digital currency.
In 2022, the international community excluded Russia from the Swift international interbank exchange network, an essential cog in global finance – also dubbed “the economic nuclear weapon”. Many foreign banks have also applied increasingly restrictive policies on payments from Russia. While the country is the eighth economy in the world in terms of GDP (just after France), the ruble has unscrewed this year and lost more than 18% against the dollar since January. A fall which also prompted the organization of a surprise meeting of the BCR on Tuesday to “examine the question of the level of key rates”, she said in a press release.
Get out of the US dollar
However, Russia has been seeking since the beginning of the war to stimulate trade in national currency, and above all to get out of the American dollar, used for the majority of international trade. According to the vice-governor of the national bank, Olga Skorobogatova, this new currency should eventually allow Russia to facilitate cross-border payments between countries that also have a digital currency. And therefore to streamline trade with, in particular, its Brics partners (Brazil, India, China, South Africa), many of whom have remained neutral on the war in Ukraine. The digital ruble could thus allow Russia to guarantee its monetary sovereignty if the country were to be completely isolated by the United States and its allies.
“In the current context, it is important to have independent payment instruments and financial information channels that can be used in our exchanges with foreign partners”, declared at the beginning of August Nikolay Zhuravlev, vice-president of the Federation Council, during a debate on the digital ruble in the framework of the financial congress of the Bank of Russia. However, this should first be linked to the digital currency platforms of other countries, which is not currently the case, since no country has a functional official digital currency.
By testing this innovation in real conditions, Moscow is still joining the twenty or so central banks that are currently experimenting with a digital currency through pilot projects. Wider according to the International Monetary Fund (IMF), more than half of the world’s central banks – such as those in the Euro zone, India, China or Japan – are studying the development of such a currency for operations that affect the general public.
The ambition of development in 2025
While cryptocurrencies such as Bitcoin use decentralized payment systems that do not depend on governments, digital currencies issued by Central Banks are regulated by the state. “Advocators of these currencies claim that they facilitate the provision of banking services to underserved social groups, increase the efficiency of payments and reduce transaction costs,” points out Bloomberg, financial markets news agency, “while skeptics warn of privacy concerns and security risks from cyberattacks.”
This Russian test is carried out on around 600 individuals and 30 companies, according to Reuters. It will allow them to open a digital wallet on the Central Bank platform. Transactions with the digital ruble will be free for individuals. Companies will have to pay a 0.3% commission on transactions. The new digital currency is expected to be introduced on a large scale in 2025, according to the central bank’s deputy governor. From next year, it will expand the list of test participants, with 19 other banks wishing to join the pilot project.