The chairman of the central bank of Russia Elvira Nabiullina believes that digital currencies (CBDC) will become the future of financial systems as the country's economy becomes more online.
Back in October Moscow published a consultation paper on the feasibility of switching to a digital ruble and plans to launch a central bank digital currency (CBDC) by the end of the year. Nabiullina believes the move to CBDC will satisfy the demand for a fast and cheap payment system in Russia, she told CNBC news.
The advisory document states that the development of digital payments and access to the digital ruble will reduce the cost of payment services. In addition, remittances will be cheaper and promote healthy competition between financial institutions.
The idea is to drive innovation in retail payments and help create the digital economy. The stability of the entire system is also expected to improve as users become less dependent on individual vendors. Essentially, Russia wants to bring fresh blood and ideas to its economy in the form of a CBDC. Pilots and tests of the digital ruble may begin in 2022, says Nabiullina.
Proponents of sovereign digital currencies say they can help expand access to financial services and facilitate cross-border transactions. However, Nabiullina believes that there are a number of obstacles on the way to such inclusion. First of all, as she points out, if each bank does its own thing, how will they communicate with each other?
“If each bank creates [its] own system, technological systems with local standards, it will be very difficult to create some interconnections between these systems to facilitate all cross-border payments,” Nabiullina said.
Currently, cryptocurrencies still cannot be used as a means of payment in Russia or owned by government officials.
USA expresses concern about CBDC from some countries
According to former US Treasury official Michael Greenwald, "I am concerned that Russia, China and Iran are creating central bank digital currencies to operate outside the dollar, and other countries will follow." He added that such a development of events "will cause alarm."
Nabiullina acknowledged that US sanctions against Russia represent a "constant risk" and a major reason for conservative fiscal policy.
In the past, Washington has imposed a series of sanctions on Russia on issues ranging from cyberattacks to possible interference in the last two presidential elections.
As for China, it looks like the United States is more concerned about being left behind as the rapid development of the digital yuan continues. Just this morning, China announced it would continue the CBDC trials by distributing $ 6,2 million worth of digital yuan to people in Beijing through a lottery. This is the third trial after both Chengdu and Shenzhen held their own lotteries last year.
The United States is concerned that the success of these tests and the digital yuan as a whole will strengthen China's domestic economy. In addition, they are worried that this could increase international competition, which could threaten the dominance of the long-term US dollar.