Russian President Vladimir Putin has signed the digital ruble bill into law, green-lighting plans to launch a central bank-issued digital currency (CBDC) in the country’s retail and wholesale sectors.
According to an official statement put out by the government, the bill will grant the Bank of Russia – the country’s central bank – the full legal authority to act as the platform operator and will hold responsibility for all stored assets backing the digital ruble.
The legislation also includes legal definitions to help users understand the digital currency and provisions to explain how banks will act as operators of the CBDC ecosystem.
Central Bank-issued Digital Currencies or CBDCs, are cryptocurrencies tied to the value of a national fiat currency. Unlike prominent cryptocurrencies like Bitcoin (BTC) or Ether (ETH) which are decentralized, CBDCs operate on a centralized blockchain that is controlled by the token-issuing authority, in this case, the government or the central bank.
Digital Ruble To Go Live From August 1
Both houses of the Russian parliament – the State Duma and the Federation Council – passed the digital ruble bill on July 11 and 19, and sent the legislation to the President’s desk for final approval.
With Putin’s signature, the law is scheduled to go into effect from August 1 onwards, with the exception of one rule – Article number three – which includes amendments to Russian bankruptcy and inheritance laws that are expected to take effect from August 2024.
The new legislation will allow the Bank of Russia to launch its first CBDC pilot involving real consumers next month. Earlier reports suggested that the central bank already entered into a partnership with 13 local banks and was expected to roll out trials in April.
Provisions of the bill indicate that the digital ruble can be used by Russian residents to make payments and as a method to transfer money from digital wallets that would be managed by a private bank authorized by the Bank of Russia. However, the CBDC cannot be used for investment purposes, loans, or deposits.
The digital ruble is said to sit alongside cash and non-cash rubles as the third form of currency in Russia.
In an interview with national television, Elvira Nabiullina, Governor of the Bank of Russia, said that the government will not force anyone to use the digital ruble. She noted that the central bank hopes for the CBDC to provide a new opportunity for consumers and businesses to conduct cheaper and more convenient transactions.
The governor explained that for Russian citizens, all transfers and payments in digital rubles will be free, and the tariffs for businesses accepting the CBDC as a form of payment will be 0.3% of the transaction.
The CBDC Has Provisions For Inheritance Through Dispositions And Wills
The digital ruble bill also includes provisions aimed at the inheritance of assets. This allows individuals to pass on their rights to the digital currency to a nominee of their choice through testamentary dispositions or wills.
The Putin administration in collaboration with the central bank will establish rules and procedures for issuing such orders. The legislation would enable adequate management and distribution of the digital asset after the demise of its legal holder.
Digital Ruble Is Not Expected To Be Fully Launched Until 2025
Although the digital rubles bill has been passed, the CBDC is not expected to be widely adopted for years. In an interview given to Forbes, Olga Skorobogatova, the deputy governor of the Bank of Russia, stated that most citizens will only get access to digital ruble wallets from 2025 at the earliest, or possibly even 2027.
With CBDC regulations now in action, the next up for Russian lawmakers is to introduce proper legislation for cryptocurrencies. After a series of delays leading up to May, State Duma official Anatoly Aksakov promised to pass four bills related to crypto mining, taxation, and cross-border settlements. However, the bills continue to be delayed and look unlikely to be passed any time soon.
The Russian ruble is considered to be one of the worst-performing fiat currencies in the world. Thanks largely to the stringent economic sanctions imposed on the country by the West for its military operation in Ukraine.
The country was cut out of the SWIFT network, which blocked it from conducting cross-border transactions in U.S. dollars, leading to rising inflation that has forced the central bank to raise interest rates on the ruble to 8.5%.
The digital ruble, which has been under work for several years, was fast-tracked following the economic sanctions which threatened to cripple the Russian economy. Russia, which is a member of the BRICS nations – Brazil, Russia, India, China, and South Africa – also has plans to launch a gold-backed cryptocurrency to facilitate cross-border transactions, bringing back the global gold standard that existed before the dollar standard.