Russia’s central bank digital currency (CBDC) pilot is now underway, with a senior lawmaker hinting at programmability features for the digital ruble.
In an interview with Kommarsant, Chairman of the State Duma Committee on Financial Markets Anatoly Aksakov stated that authorities are mulling the decision to add tighter controls to the CBDC.
Aksakov noted that the Bank of Russia will conduct extensive experiments into digital ruble programmability using smart contracts in the coming years. The lawmaker confirmed that the real-world application of a programmable CBDC is a dicey affair and indicated a willingness to be among early users before a national rollout.
Despite the attendant risks in proceeding with programmable CBDCs, Aksakov noted a range of use cases, including parental controls to guide how children spend their stipends. Using the programmable features, the lawmakers pointed out that parents can restrict their children from spending on the “wrong things.”
Proponents of Russia’s programmable CBDC plans say that features will be vital in stifling illicit transactions such as terrorism financing and fund transfers to blacklisted foreign entities.
However, there are fears that these seemingly benign use cases could become a grim affair if misused by the state.
“Can the state interfere in this process? I admit that this is also possible, although so far we have not yet approached this procedure for using digital rubles,” said Aksakov. “In principle, the state, since everything turns around in the information system of the Central Bank, can establish rules that will prevent payment of unscrupulous external partners, let’s say.”
To allay fears, he added that at the moment, the Russian banking regulator is not experimenting with smart contracts, with 2025 touted as a potential start date.
Critics have pointed to rumored plans by the government to pay the salaries of civil servants and offer aid in digital rubles as proof that Russia could implicitly make usage compulsory while invading privacy rights.
“The State Duma can quite quickly pass a law that part of the wages are paid in digital rubles,” said Andrei Barkhota, a financial market analyst. “In this regard, there is indeed some interest on the part of the fiscal departments, on the part of the state, which will be able to monitor these operations, understand not only the visible income of citizens, but also expenses.”
Rallying against CBDCs
Despite the benefits offered by programmable CBDCs, several jurisdictions have pushed back against the idea. The European Central Bank (ECB) director Flavio Panetta disclosed that the incoming digital euro will not be programmable with the Bank of England making similar submissions.
Both jurisdictions say that programmable CBDCs will reduce the offering to the status of vouchers, stripping away its purpose as complementary to cash payments.
In place of restrictions, several central banks are experimenting with conditional payments, based on the occurrence of certain events within the control of users.
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.
Watch: Smart contracts are neither ‘smart’ nor ‘contracts’
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
