With the growing momentum around the ‘digital ruble’, the prospective Central Bank Digital Currency (CBDC) of the Russian Federation, the country’s parliament has made considerable strides towards landmark legislation. The State Duma shown earnest progression on July 11 as the lower parliamentary house approved the bill in its third reading, inching it closer to the upper chambers and eventually, to the desk of the President.
Introduced initially in Dec 2022, the bill breezed through its first reading in March 2023. The proposed law empowers the Bank of Russia (BoR) to manage the CBDC infrastructure while shouldering responsibility for issuance and security. The bill prioritizes understanding and defining key concepts such as ‘users’, ‘platforms’, ‘investors’, and other participants to ensure clear guidelines and robust regulation for the sector.
Despite the infamous reputation of cryptocurrencies like Bitcoin, Russian government retains a keen interest to capitalize on blockchain technology through CBDC to offer new payment avenues and cross-border solutions. A policy echoing these aspirations places payments and transfers at its core while omitting savings accounts for users. Striking a balance in this structure, individual users enjoy fee-free transactions while corporate clients are subject to transaction fees not exceeding 0.3%.
Digital currencies and blockchains have not always shared a harmonious relationship within Russian boundaries. Initially, Russia’s leader Vladimir Putin displayed skepticism toward digital assets, leading to an extensive ban. Yet, despite his apparent reservations, Putin recognized the potential of the technology at the heart of cryptocurrencies, endorsing its widespread adoption for its potential to transform cross-border payments and disrupt financial monopolies worldwide.
Heightened by repercussions from Ukraine’s invasion seeing Russia faced with economic sanctions which stifled global trade, we witnessed a surge in usage of crypto assets by Russian companies. As the Society for Worldwide Interbank Financial Telecommunications (SWIFT) had prohibited Russia, digital asset exchange saw a considerable increase in inflows from the region. This raise in inflow was a determining factor for critics who speculated about the country lifting the ban on cryptocurrencies.
Such speculation was validated by Gleb Jout, the head of Bitget Russia, who elaborated on how citizens are resorting to virtual assets to shield themselves from the potential of hyper-inflation in the face of global sanctions. He opined, “Even people who were not in crypto at all are now studying how to acquire Bitcoin, Ethereum, or USDT, and save some of their money before the country enters a period of extreme hyperinflation, which is already now unfolding.”
As Russia advances towards launching its digital ruble pilot in August, the world closely watches how this introduction of CBDC might affect the existing cryptocurrency landscape and traditional financial practices in the country. Readers, what are your thoughts?
Source: Cryptonews
