Last week the Bank of Russia outlined a timetable for the rollout of its central bank digital currency (CBDC). While it is already testing a digital ruble, real transactions pilots will commence in 2023, including person-to-person transactions and those between consumers and corporates. More details on the schedule are provided below.
No plans to limit CBDC holdings
Like other central banks, the Bank of Russia plans to distribute the digital ruble via commercial banks, retaining today’s two-tier system.
Most central banks have opted to restrict the amount of CBDC available to limit the flight of commercial bank deposits to central bank money. This isn’t the Bank of Russia’s primary plan. Instead, it intends to roll out the digital ruble gradually and believes that bank deposit interest will prove attractive compared to the non-interest bearing digital ruble.
Its view is the demand for central bank money will also depend on ease of use, transaction costs, and the ability to convert the funds.
However, it does envisage a shift to central bank money, which will result in a significant reduction in commercial bank liquidity. There’s a possibility it could result in a structural liquidity deficit, which the central bank plans to meet by providing liquidity. Hence, the central bank may evolve from a net borrower from commercial banks to a net lender.
Only if that doesn’t work does the central bank stands ready to introduce limits on the amounts of digital rubles that a wallet can hold.
Colored digital rubles to track usage
The primary stated goal of the digital ruble is to optimize the cost of settlements.
The Bank of Russia also talked about colored coins, which restrict the use of digital money for specific purposes. This includes targeted government spending, public procurement and government contracts.
Additionally, the central bank envisages a digital ruble stimulating competition.
Digital Ruble Schedule
2022
- testing platform.
2023
- pilot real transactions p2p and between business and consumers
- also execute some smart contracts.
2024
- connection all credit institutions
- create additional payment options and transaction types
- federal treasury starts using it for transactions with consumers and business
- participate in cross border CBDC platforms and forex.
2025
- launch offline mode for the digital ruble
- connect non-bank financial intermediaries, financial platforms, and exchanges.
How the Eurozone plans to restrict CBDC holdings
Last week, the President of the Deutsche Bundesbank, Dr. Joachim Nagel, shared details on Europe’s current thinking on restricting CBDC holdings. A hard cap for individuals will mean excess amounts of digital euros are swept into a bank account. But for businesses, the plan is to use a tiered interest approach, making it unattractive for companies to keep too much money in the digital euro.
