Russia’s plans to launch a pilot of the digital ruble have run into its first bottleneck as the Bank of Russia announced its postponement, according to a report from local news outlet TASS.
The report noted that the central bank delayed the launch indefinitely because the specific legislation to give validity to the pilot was yet to be passed by parliament. TASS reported that the bill had only managed to scale through the first reading in the State Duma, the lower house of parliament, but the bill may be operational in May.
The pilot was originally expected to be launched on April 1, with as many as 15 banking institutions expected to play a role in the experiments. Despite the delay, the banks confirmed their technical readiness for the central bank digital currency (CBDC) pilot, with their employees, said to be the first participants in the experiment.
“The use of smart contracts should reduce the operational load of banks and make the deals transparent, which not only will reduce the chances of the misuse of government and banks’ funds, but ultimately simplify the control over the existing contracts,” Vitaly Kopysov, head of innovations at Sinara Bank, said.
Some banks participating in the retail CBDC pilot include Alfa Bank, Soyuz Bank, Rosbank, Delobank, and Sinara. The financial institutions disclosed to TASS that they have already put in place the machinery required for basic operations like opening a digital ruble wallet and finding information like the transaction history.
Russia’s CBDC pilot will only be open to a small group of select persons in the first stage. Transaction volumes will also be limited in a “slow-and-steady” approach, but the government says it will explore scaling options in the second phase.
A full launch of the digital ruble was intended for 2024, but the difficulties prompted by Western sanctions against Russia forced the government to explore the possibility of a 2023 launch date. Since the imposition of the economic sanctions, Russian banks were kicked off the Swift platform, a move that prompted CBDC cross-border functionalities.
Gazprombank calls for caution
Russia’s third-largest bank Gazprombank has warned commercial banks to be wary of the risks posed by the proposed digital ruble. According to the bank, Russian commercial banks face dire risks of bank disintermediation triggered by increased use of the CBDC, with consulting firm Yakov and Partners saying that banking entities could lose up to $500 million.
“It is imperative that banks take measures to mitigate potential losses,” a Gazprombank spokesperson said. “Hence it is crucial to recognize the potential risks associated with the transition to a digital ruble and approach its implementation with caution, allowing the financial system sufficient time to adjust.”
Watch: CBDCs and BSV
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