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(Kitco News) - While countries around the world explore the creation of central bank digital currencies (CBDCs) as an additional option alongside physical cash, results on the ground continue to show a tepid response from consumers, with Russia being the latest country to admit that the public reaction to the digital ruble has been lackluster.
According to a report from Kommersant, the Association of Russian Banks (ARB) sent a letter to the Bank of Russia asking for clarification on Moscow’s CBDC plans and warned that thus far, citizens have been “wary” of the digital ruble.
“[Russian] people have an extremely wary attitude to the introduction of the digital ruble. [This attitude is shared by] the consumers of financial services,” the ARB said. The letter also called for the Bank of Russia to “propose the introduction of a direct ban on forcing citizens to open a digital ruble wallet.”
The ARB asked the central bank to provide clarification on several topics, including, “What is a digital ruble – a third form of money or non-cash currency; will the central bank compensate banks for the costs of providing customers with access to the digital ruble; and will banks be required to become participants in the project, and if so, what do they need to change in their infrastructure?”
Russia began testing the digital ruble on August 1, and 15 of the country’s largest banks are participating in the pilot project. According to Oleg Sysuev, Chair of the Board of Directors at Alfa Bank, there is still a high level of confusion regarding the legal nature of the digital ruble.
“Generally speaking, and on a global scale, CBDCs are very young,” Sysuev said. “And as the Russian banking system, in terms of IT, is still ahead of many developed countries, we are – in some respect – pioneers. Therefore, there are a lot of questions to be answered. It is not clear how [banks] will be incentivized to distribute the [CBDC]. And it is not clear how customer interest will be driven up. Nor is it not clear how the [Central Bank] will regulate transactions with the [CBDC].”
Additional questions identified by other market participants include whether or not the state, police, and regulators can block digital ruble transactions, set restrictions on who can transact with the digital currency, and whether there will be a time limit to spend the tokens before they are burned. This is of particular interest to the investing crowd as the digital ruble cannot be used to purchase investment products, and these participants are wondering how the new money supply will interact with financial markets.
While there are many questions that remain and the public has been reluctant to engage with the CBDC, the current plan is for the digital ruble to enter wide circulation beginning Jan. 1, 2025.
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| Putin signs digital ruble bill, Japan explores a digital yen, and Nigeria upgrades the eNaira app |
Belarus follows in Russia’s footsteps
Russian ally Belarus is set to follow up the launch of the digital ruble with the launch of a digital version of the Belarusian ruble for use in cross-border payments.
According to a report from Interfax, the National Bank of Belarus (NBB) plans to introduce a digital Belarusian ruble that can be used to conduct settlements for international operations.
Dmitry Kalechits, Deputy Chair of the Board of the NBB, announced the digital currency via a statement on the NBB website, saying, “One of our most significant large-scale projects will be the introduction of the digital Belarusian ruble and its use at the cross-border level.”
“The National Bank of the Republic of Belarus defines the Belarusian digital ruble as a legal means of payment that performs all the functions of money, is issued by the central bank, and has the same value as the cash and non-cash Belarusian ruble,” he added.
Kalechits noted that the NBB is considering the possibility of making payments in digital currencies between the central banks of Belarus and Russia.
“Of particular interest is the possibility of making cross-border payments in the digital currencies of central banks,” he said. “The interaction of digital currency platforms of central banks will increase the availability of cross-border payments with counterparties from partner countries by integrating them, which is especially true in conditions of sanctions pressure on the economies of Russia and Belarus, as well as restrictions on access to international payment systems.”
This announcement from the NBB follows a report in May that Belarus President Alexander Lukashenko met with Elvira Nabiullina, Chair of the Bank of Russia, to discuss the topic of the digital ruble. In early 2023, NBB head Pavel Kallaur reported that the central bank was studying the topic of introducing a digital ruble and would make an appropriate decision by the end of the year.
