Russia could begin testing its central bank digital currency (CBDC), named the digital ruble, in just a matter of weeks.
On Wednesday, the highest legislative body in the country, the Federation Council, passed a bill that grants the central bank digital currency (CBDC) legal authority.
Last week, the bill in question had made its way through the State Duma.
However, it should be noted that the bill will only come into effect after it has been signed by President Vladimir Putin. If he does give it the green light, then tests for the digital ruble would begin from August 1st.
If the said legislation goes into effect, then the authority of the platform operator would be granted to the Russian central bank.
Legal definitions have also been outlined in the bill for users and how they will operate the accounts with the bank.
The country’s economy has been struggling since last year, when they began a war against Ukraine. The bill has been introduced when the Russian fiat has been dealing with the brunt of Western sanctions.
The said sanctions were imposed not long after it initiated the war against Ukraine and have resulted in the Russian ruble taking a hit.
If the bill goes through, Russians would be able to use their digital wallets for making transfers and payments.
These wallets would be within the platform of the central bank or the banks that will work with it. But, the central bank clarified that the CBDC would not be available for deposits, or lending, only transfers and payments.
Russia is moving forward with its CBDC, with other countries also launching pilots for their respective CBDCs, including Japan and China.
As far as the United States is concerned, it is still on the research stage. However, the Federal Reserve and the Biden administration have looked into the implications of introducing a digital dollar.
A CBDC is quite different from cryptocurrencies, such as Bitcoin, as it is a centralized token and its value is associated with a national fiat currency.
Critics have highlighted the major privacy risks associated with CBDCs, as they would grant the government a lot of visibility into private transactions.
Mass surveillance is a very common concept in Russia and Elivira Nabiullina, the head of the Russian central bank, said that they would take privacy into account.
But, she also asserted that the digital ruble would not be able to offer the same level of anonymity that people are able to enjoy in cash transactions.
At the start of the war, the Russian ruble had been able to repulse double-digit hikes, but its exchange rate against the US dollar has declined.
It had become one of the best-performing currencies in 2022, but today, it is considered one of the worst-performing currencies right now due to Western sanctions and rising inflation.