Russia announces digital currency

RUSSIA / FSU POLITICS - In Brief 22 Oct 2020 by Alex Teddy
On October 21 the Central Bank of Russia (CBR) said that a digital ruble will be introduced. This will not be a cryptocurrency as these are outlawed in Russia.CBR thinks that the fast growth of fintech will need a kind of RUB that is more amenable to electronic transders. CBR is not going to set up a blockchain for this. The new currency will be called the Central Bank Digital Currency (CBDC).The idea is that the CBDC will reduce the risk of other types of digital payments. The payment system will be utterly reliable. The bank is trying to make cashless money a real solution and allow them to be used offline too. Retail clients will be able to use CBDC for buying items, transferring to other people and companies as well as paying tax.Companies will be able to use the CBDC in their contracts with customers or the government. This should make things smoother. CBR is concerned that there might be a liquidity shortage due to CBDC. It might take a while to sort this out. The CBR has still not taken a definite decision on whether to launch the CBDC 2021.CBR wants to reduce people putting RUB into foreign digital currencies. There was a run on Russian banks in 2020 during the worst of the crisis. Several other countries are looking into setting up digital currencies including Ukraine. The idea is that such a currency has a higher transaction potential and cut costs.CBR is not planning to change much even if the CBDC becomes a reality. This is almost a version of the extant electronic RUB. However, CBDC will be available to firms and private citizens.

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