After Flipping On Crypto Stance, Russian Central Bank Trials Digital Ruble With 12 Institutions
The first phase of Russia’s Digital Ruble pilot program is underway with 12 different banks joining in to start a trial run of using the Central Bank’s digital currency for a wide range of different payment types. This all comes just days after Russian central banks highlighted the threats of Bitcoin and cryptocurrency, then reversed his stance.
By Andrew Senior
January 27th, 2022
Promsvyazbank, a state-backed, formerly private Russian bank from Moscow, has confirmed that it is already live testing consumer-to-consumer transactions with the digital ruble.
Tinkoff Bank, an online commercial bank based in Moscow and founded by Oleg Tinkov in 2006, is taking steps to initiate similar tests in the coming weeks and VTB Bank, one of the leading universal banks of Russia offering a wide range of banking services and products, says that it has the necessary infrastructure already in place to begin pilot program.
A representative from VTB Bank commented to Russia’s Tass news agency that,
“Piloting includes integration with the digital ruble platform and the introduction of services, such as opening an individual’s wallet through a mobile application and digital ruble transfers between individuals.”
Nine other banks are taking part in the digital pilot program – Ak Bars Bank, Alfa-Bank, Bank Dom.rf, Gazprombank, Rosbank, SberBank, SKB bank, Bank Soyuz and Transkapitalbank – and are set to begin accepting consumer-to-consumer transactions and processing payments using the digital ruble this month.
In December 2021, the Central Bank of Russia announced that it had completed a prototype digital ruble and the supporting network and was ready to begin rolling out a pilot program with consumer-to-consumer payments in early 2022 along with moving into the second stage of testing their digital currency which was outlined in a report by Russia’s Tass news agency,
“The second stage of testing involves the connection of the Federal Treasury and the implementation of the functionality of smart contracts, as well as consumer-to-business (С2B), business-to-business (B2B), business-to-government (B2G) transactions, and so on. In the future, financial intermediaries, financial infrastructure will be connected, an offline mode will be introduced, and the digital ruble will be exchanged for foreign currency and the possibility of opening wallets for non-resident clients will be provided.”
Russia’s Central Bank bank confirmed that the pilot will focus on domestic transactions and that it will not be trialling cross-border payments during this stage. Elizaveta Danilova, the director of the Bank of Russia’s Financial Stability Department commented that,
“So far, in many countries, cross-border payments have been left to the next stage. And the same is true in Russia. First of all, for example, we are starting this year to test the use of the Central Bank’s digital currency. We will also start with domestic payments and payments between citizens. And as far as I know, many regulators use this approach. Therefore, probably, cross-border payments, you can probably think about them, but so far this is not a subject for the near future.”
The launch of the digital ruble pilot scheme coincides with a recent proposal from Russia’s Central Bank that the country introduce “a ban on the organization of the issuance and (or) issue, organization of the circulation of cryptocurrencies (including by crypto-exchanges, crypto-exchangers, P2P platforms) in the territory of the Russian Federation and establish liability for violating this ban.”
A recent report released by Russia’s Central Bank entitled “Cryptocurrencies: trends, risks, measures,” also calls for “a ban on investments by financial organizations in cryptocurrencies and related financial instruments, as well as on the use of Russian financial intermediaries and Russian financial infrastructure to carry out transactions with cryptocurrencies” and the implementation of “a set of measures to limit” cryptocurrency mining in Russia owing to “the significant negative effects that it has on the energy, environmental and industrial sectors”. The report goes on to say that cryptocurrencies are volatile and widely utilized for illegal activities including fraud. By offering an outlet for people to take their money out of the national economy, they risk undermining it and making the regulator’s job of maintaining optimal monetary policies harder.
The Central Bank of Russia launched a public consultation on the launch of a central bank digital currency in October 2020 and revealed plans to build a prototype digital ruble in April 2021.
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