A bill was signed by Russian President Vladimir Putin into law that would give the ‘digital ruble’ legal tender, amid increasing inflation in the country and tough Western sanctions due to the war with Ukraine.
The bill
In accordance with the bill, the central bank of the country i.e. the Bank of Russia has been granted legal authority by the president to serve as the operator for the CBDC (central bank digital currency).
Legal definitions are also mentioned in the bill for users and it also mentions details about the new framework that would now be applicable to banks.
Even though Putin has given the bill the green light, many Russian officials have stated that they do not expect widespread adoption of the digital ruble for years.
The central bank’s deputy chair, Olga Skorobogatova, said in an interview that access to online wallets will start for most citizens in early 2025.
A CBDC is different from cryptocurrencies like Bitcoin because it is a centralized token and its value is linked to a national fiat currency.
Due to rising inflation, the Russian Ruble has become one of the worst-performing currencies in the world.
All of this has been accelerated due to the war that Moscow had launched against Ukraine in February of last year, which saw it subjected to severe Western sanctions.
The Ruble
The Russian fiat currency is currently trading at 90.6 and 100 rubles to the US dollar and Euro, respectively.
Due to high inflation in the country, the Russian central bank pushed up its interest rate to 8.5% in the previous week.
While the idea of a digital Ruble had been talked about for years, the concept was taken seriously after a barrage of sanctions were imposed on Russia by the US and its allies last year.
Earlier this year, there had been accelerated efforts to take the legislation for bringing the CBDC online forward.
In the last two weeks, the bill had been passed by both the Federation Council and the State Duma, after which it was sent for Putin’s signature.
Now, the central bank has permission to start testing is central bank digital currency from August 1st.
The details
The bill dictates that Russians will be able to use their digital wallets for making transfers and payments. These wallets will be maintained on the platform of the central bank or on that of partner banks.
The central bank also revealed that the digital ruble will not be available for deposits, or loans and can only be used for transfers and payments.
Elvira Nabiullina, the governor of the Russian central bank, clarified that it would not be mandatory for Russians to adopt the CBDC, but was hopeful that more and more people would consider it.
The governor said that people could use the digital ruble if they want to, but they don’t have to. She added that it would be cheaper and more convenient for businesses and people to use it.
The governor went on to add that it was a new opportunity.