Russian Banking Giant to Start CBDC Testing This Month
The Bank of Russia (BoR) has announced the start of CBDC trails starting 15th August. The bank has created a network of 13 banks under its jurisdiction to participate in the CBDC pilot testing. The digital ruble project is working in tandem testing phase is set to begin soon as per updates provided by First Deputy Governor Olga Skorbogtova.
It seems that Russia is racing against the EU to get its digital legal tender up and running first. For the testing phase, digital Ruble has received various updates to ensure a faster and more seamless transition for retail usage.
On the other hand, BoR has also aired plans for the issuance of digital wallets, automatic bill payments, peer-to-peer transfers, and QR code payment facilities. At the initial stage, these facilities are available around 11 Russian cities. Plans for the digital Ruble include expanding to the commercial sector by 2024.
It will upgrade to dynamic QR code-based payments. To this effect, the Central Bank intends to add new features such as automated bill settlement features recommended by officials. By 2025, the commercial and retail accessibility of the digital ruble will be completed.
On the other side of the border, EU officials have continued to address the matter of CBDC with relative ease. The plans of the aggregation to publicize their CBDC are determined in 2027. The main reason for the delay in the project is the involvement of various bureaucratic offices that will process the EU CBDC project through several levels of testing cycles.
Both digital ruble and euro are hosted on permissioned DLTs. Both projects consist of smart contracts to automate the payments process spread across various jurisdictions such as retail and commercial enterprises.
BoR was postponing its CBDC pilot in March 2023 which was extended to April. The project required a green light from the State Duma Committee on Financial Market for real-time payments. To deal with the increased delay, President Vladimir Putin signed package bills regarding the ruble on 24th July.
The country intends to leverage smart contract technology as a way to automate the financial infrastructure and ease the remittance process. The Sinara Bank Director has maintained that adoption of smart contracts is not going to overwhelm banks in terms of technical upgrades and also bring transparency for clients.
In this manner, corruption in designated funds allocated by the state or businesses will decrease. Sinara Bank is among the 13 banks selected by BoR to carry out the CBDC pilot.
BoR Guidelines for CBDC
The direction of the Russian ruble project is projected by BoR guidelines issued in 2018-202 as a Financial Technology Development initiative. The goal of this framework was to designate digital ruble as a financial market competitor, reduce risks, costs, and promote financial inclusion.
At the same time, the project intends to highlight the prowess and competitiveness of Russia in the field. There are two main driving factors behind the acceleration of the digital ruble the first one is to evade Western sanctions on account of the Ukraine war.
The second one is the increasing participation and development of the BRICS alliance. Meanwhile, Russia is banned by BIS which acts as a clearing house for the finalization of international trade.
Additionally, the suspension has also affected the credit standing of the state limiting its international loaning options. Economics Professor Vladislav Ginko claims that a digitized form of ruble can bypass these restrictions since it can operate outside of the BIS-approved network.
