Russia to pilot digital ruble prototype in 2021

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Russia’s central bank intends on launching a digital ruble prototype this year, its deputy chairman has recently revealed. The bank announced its central bank digital currency plans in 2020, causing rifts within the banking sector. It now intends to launch the prototype as development continues into the next year.

Alexey Zabotkin, the deputy chairman of the Bank of Russia, confirmed the news at an event recently hosted by the Russian Economic School. He said the bank wants to give the citizens an opportunity to test the digital ruble, even though it won’t support real-time transactions initially.

“Next year, based on that prototype and any additional developments needed, we will start testing it,” the regulator stated, as local news outlet Prime reports. He added, “But it won’t allow us to process real transactions yet.”

The bank first announced its digital ruble venture in mid-October of 2020. “A digital ruble can make payments faster, simpler and safer,” it stated on its consultation paper. It further cited the reduction of costs and promotion of competition among financial institutions as other advantages of the CBDC.

The proposed digital ruble has caused a rift between the commercial banks and the industry regulator. The banks have expressed concern that the CBDC would put them in direct competition with the central bank. They also pointed to the centralized nature of the CBDC as a potential risk for users in the long term.

However, as the deputy governor revealed in additional comments to CoinDesk, the digital ruble has received overwhelming support, noting that 83% of the respondents they polled fully support the digital currency.

Zabotkin added that the central bank will monitor the CBDC’s progress before deciding on the next course of actions.

“We’re keeping on with the plan we earlier revealed. At this point, we’re in the process of developing the design of the digital ruble, which will be public and discussed with the market participants. The decision on the launch will be made next year based on testing results.”

For the Russian banking industry, the digital ruble is bad news. According to Anatoly Popov, the deputy chair at Sberbank, the CBDC “would juxtapose banks and the Bank of Russia, and instead of the further development we’ll have a competition.”

Sberbank, the largest bank in Russia, has already started exploring alternatives. As it revealed in December, it’s exploring its own token and a digital assets trading platform. Such a token would, however, be illegal under the current Russian laws. The country doesn’t recognize any digital token, including Bitcoin, as legal tender.

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.

See also: CoinGeek Live panel, The Future of Banking, Financial Products & Blockchain