Banks Fear Losing Business to CBDC
The digital ruble, a central bank digital currency (CBDC) that is being developed by the Bank of Russia, has faced resistance from some of the country’s commercial banks, who fear losing their business and customers to the new digital currency. According to a report by Comnews, even the banks that are participating in the pilot project of the digital ruble are looking for ways to avoid dealing with the coin and preserve the banking status quo.
The report cited the example of VTB Bank, one of the largest banks in Russia, which announced a new solution that allows digital ruble holders to convert their tokens to cash at ATMs. The solution will initially be available at some 14,000 VTB ATMs nationwide, but could potentially be expanded to all Russian ATMs in the future. The media outlet called the development a “commercial bank vaccine” against the digital ruble, as it goes against the policy of the Bank of Russia, which is trying to actively introduce the new currency to the public.
The report claimed that the banks are not interested in working with the digital ruble, as it is completely controlled by the Bank of Russia and would reduce their profits and liquidity. The banks are also concerned about the security and privacy of the digital ruble, as well as the potential legal and technical issues that could arise from its implementation.
Bank of Russia Moves Ahead with CBDC Plans
Despite the opposition from some of the banks, the Bank of Russia has been moving ahead with its plans to launch the digital ruble, which it sees as a way to enhance financial inclusion, innovation, and competitiveness in the country. The Bank of Russia has been conducting a pilot project of the digital ruble with 13 banks and a limited circle of their clients since August 2023, and plans to expand the testing to more participants and use cases in 2024.
The Bank of Russia expects to launch the digital ruble by 2025, and has stated that citizens and businesses should be able to use the CBDC “at their own request”. The Bank of Russia has also expressed its interest in allowing foreign banks and entities to use the digital ruble, as well as using the CBDC to facilitate cross-border payments and reduce its dependence on the SWIFT system.
The Bank of Russia has also been vocal about its negative stance on cryptocurrencies, such as Bitcoin, which it considers to be a threat to financial stability and sovereignty. The Bank of Russia has rejected the proposal of the Finance Ministry to regulate cryptocurrencies, and has instead advocated for a ban on their circulation and mining in the country.
Digital Ruble Could Transform the Russian Economy
The digital ruble, if successfully implemented, could have a significant impact on the Russian economy and society, as it could offer a faster, cheaper, and more convenient way of making payments and transactions. The digital ruble could also enable the Bank of Russia to implement more effective monetary policies, such as negative interest rates or helicopter money, to stimulate the economy and combat inflation.
However, the digital ruble could also pose some challenges and risks, such as disrupting the existing banking system, creating new cyber threats, and infringing on the privacy and rights of the users. The digital ruble could also face competition from other CBDCs, such as the digital yuan, which is being developed by China, or the digital euro, which is being considered by the European Central Bank.
The digital ruble is still in its early stages of development, and its final design and features are yet to be determined. The Bank of Russia has stated that it will take into account the feedback and suggestions of the public and the stakeholders, as well as the international best practices and standards, in developing the digital ruble. The Bank of Russia has also stressed that the digital ruble will not replace the existing forms of money, such as cash and bank deposits, but will complement them and offer more choice and convenience to the users.