Days after establishing a legal framework for the digital ruble, the Russian government says the central bank digital currency (CBDC) will not be compulsory for citizens.
The government stated that using the digital ruble for transactions will be optional for residents, according to a report from local news outlet Solidarnost. Elvira Nabiullina, chairman of the Bank of Russia, noted that the benefits with using the digital ruble would be sufficient to attract new users.
“This is an absolutely voluntary use,” Nabiullina said. “This is an additional opportunity for people.”
There have been lingering fears that the Kremlin will make the CBDC compulsory in Russia as it looks for ways to circumvent Western-backed economic sanctions following its invasion of Ukraine. Although multiple public officials have reiterated that the digital ruble will not be “forced” on citizens, privacy concerns have trailed the CBDC development.
Critics point out the absence of the word “privacy” in the newly signed legal framework for the digital ruble. The increased powers given to the central bank in the document confused the critics over the privacy rights of digital ruble users.
In the draft law for the digital euro, privacy featured prominently throughout the text, appearing over 21 pages. Russia appears to be sacrificing privacy to crack down on illicit financial activity, a move that has drawn the ire of privacy advocates.
“Digital currency calculations have the greatest degree of transparency, that is, it will become easier to track transactions,” Sergei Katryin stated, head of the Russian Chamber of Commerce and Industry.
Despite the waves of criticism, Russia believes it will onboard several users on its CBDC platforms based on its functionalities. Proponents argue that saving in digital rubles is a better alternative than bank deposits, given the total protection given by the state.
Others point to the speed of settlement and the zero transaction costs for individuals as reasons for the success of the incoming digital ruble. According to the new law, businesses will only pay a 0.3% commission using the digital ruble compared to the 2.5% under legacy systems.
There are speculations that the government could trigger CBDC usage by offering child benefits and other forms of social assistance via the digital ruble.
Experts expect a good start
The newly minted law gives the green light for the Russian central bank to formally begin its CBDC pilot after postponing it back in April. At that time, the central bank cited the absence of a legal framework to begin its experiments as lawmakers scrambled to roll out legislation supporting the CBDC.
The banking regulator has reportedly lined up several leading commercial banks to assist in the digital ruble pilot. Experts expect a frenetic approach to the CBDC studies, with a full-scale rollout expected in 2024.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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