After months of legislative back and forth, the State Duma, Russia’s lower house of parliament, has passed a law approving the launch of a central bank digital currency (CBDC).
The State Duma passed the legislation on July 11 after three readings on the floor of the House, Interfax reported. The bill, supporting the creation of a digital ruble pilot, amended certain parts of the Russian civil code and established the right of the central bank as the primary issuer of the CBDC.
The new law gives the Bank of Russia the green light to explore cross-border functionalities with “not only foreign states but also a group of foreign states.” Despite the innovative provisions of the legislation, the law places an outright ban on the opening of joint digital ruble accounts by multiple users.
In its first iteration, the bill sought to limit digital ruble usage to only residents, but an amendment proposal in May allowed foreigners access to the CBDC. Other changes to the initial bill revolved around the role of the central bank, debt operations, and restrictions on advertising.
“At the same time, the adopted law extends for a year (until December 31, 2024) the right of the Central Bank to determine the circle of users of the digital ruble platform, as well as the list of transactions on the platform and their threshold amounts,” according to the report. “The document also clarifies that the decision must be agreed with Rosfinmonitoring.”
An operative date for the law has been scheduled for August 1, but its provisions will have to be approved by the Federation Council, Russia’s upper house.
Back in April, the start of the digital ruble pilot was postponed by the central bank over the absence of a legal framework to guide the experiments. With the passage of the new CBDC law, the digital ruble pilot is expected to begin operations in the coming weeks.
The banking regulator noted that it had enlisted 13 central banks to participate in the pilot, saying that it would begin experiments with users in real-life scenarios. Despite the planned use in retail, the bulk of the studies will focus on cross-border payment functionalities as the country searches for a way around existing economic sanctions in the wake of its invasion of Ukraine.
First Deputy Governor of the Bank of Russia Olga Skorobogatova disclosed that using CBDCs may provide a worthy alternative to SWIFT, a global banking platform that closed its doors on Russian financial institutions.
No offline payment functionalities for now
Due to the lack of infrastructure to support the feature, Skorobogatova said the incoming digital ruble may not be rolled out with offline payment functionality.
“We have studied the market—there are no ready-made or close to ready-made technological solutions,” Skorobogatova said. “For offline payment, you need to develop your own solution. This is in our plans, but not at the first stage.”
In an interview with Forbes, the central bank executive revealed a hybrid approach merging centralized and distributed ledger technology (DLT) for the digital ruble system. Experts believe Russia will join China and India to release the next batch of CBDCs for retail use.
Watch: Blockchain provides perfect foundation for CBDC
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