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Elvira Nabiullina, chairwoman of the Central Bank of Russia, pointed out at a press conference on Friday that the Bank of Russia does not believe that the digital ruble will lead to any major capital outflows or changes. In addition to concerns about the potential impact of the digital ruble, opponents are also worried about whether the Russian government will take tough measures to promote the adoption of the digital ruble on a large scale.
Earlier this month, the Bank of Russia warned that the discussed digital ruble could weaken its strength if people withdraw their funds to rush into the new system. According to Sber, Russia’s largest retail bank and the most vocal critic of current approaches to central bank digital currencies (CBDCs), introducing the digital ruble into the Russian financial system could cost the country’s banks up to 25 billion rubles (about $34 million).
Russia's central bank chairwoman Elvira Nabiullina said at a press conference on Friday that these concerns were unfounded.
“We don’t expect the launch of the digital ruble to lead to any major outflows or changes,” she said.
Last week, Sber calculated that banks could lose up to 4 trillion rubles ($54 billion) in liquidity in the first three years once the program is launched. As a result, cash-strapped banks will have to raise interest rates by about half and restrict lending to retail and small businesses.
Nabiullina expressed doubts about this estimate, saying: “I’m not sure where these numbers come from.” She also said that interest rates would not be affected by the digital ruble but rather by inflation rates and general monetary policy.
“If for some reason, unrelated to the digital ruble, banks experience a liquidity shortage, we have the tools to address this,” Nabiullina said.
Voices of protest
Echoing Sber’s sentiments, the National Committee on Financial Markets (NCFM), the industry group for Russian banks, said in a letter to the Russian central bank this week that the outflow of funds from banks to the digital ruble system would make banks less stable and more dependent on central bank lending. (CoinDesk reviewed the letter.)
To prevent this from happening, the NCFM recommends a model similar to China’s digital yuan, where the central bank would open digital ruble accounts for commercial banks, which would then manage retail users’ digital rubles as part of their balance sheets.
In a recent Zoom meeting with the central bank, Sber’s Popov also proposed a similar model. However, regulators do not seem open to this approach.
Russia’s financial regulator outlined possible scenarios for the launch of a future central bank digital currency (CBDC) in an analysis a few months ago. Public discussions show that most of these options scare the country’s banks.
The Russian Central Bank seems to favor a centralized model where regulators would be managers of the system and banks would help onboard users, a model that banks do not like.
In a public Zoom call with regulators, some financial institutions in Russia expressed concerns that banks would have to use their own budgets to integrate the digital ruble system without getting a business boost. In addition, the Bank of Russia could become a new government-backed superbank, and other banks would have to compete with it for the Russian people’s money.
“Tough” measures
Vladislav Martynov, an advisor to the Russian Association of Cryptocurrency and Blockchain (RAKIB), a member of the Ethereum Foundation and one of the country’s earliest blockchain advocates, said the Bank of Russia’s report did not really explain why the country fundamentally needs a CBDC.
“The Bank of Russia would prefer not to worry too much about the digital ruble, but there are initiatives like (CBDCs) all over the world and central banks are studying the concepts, and the Bank of Russia cannot sit idly by,” Martynov said.
Martynov believes that in this context, regulators will see the launch of CBDCs as an opportunity to consolidate yet another piece of central bank power.
“The spirit of the published report is very conservative: it is about the creation of a new powerful monopoly, a new national bank will dominate the market, and the role of commercial banks will be weakened,” he said, referring to the Bank of Russia as the single administrator of the digital ruble.
Another concern is that the adoption of the digital ruble will be forced through in a top-down manner, with government-controlled companies forced to use it, as happened with Russia’s own National Card Payment System (NSPK), a local alternative to Visa and Mastercard.
The NSPK was created to keep the Russian economy going as a new round of sanctions cut it off from global payment networks — a threat that felt real a few years ago. State-owned enterprises are obliged to issue NSPK cards, called Mir cards, to their employees.
“We saw how the Mir card was forcefully launched,” Martynov said. “So if they set a goal — to launch the digital ruble, they will see it through.” He added that the Russian central bank, apparently, wants as many people as possible to use the digital ruble.
Martynov believes that forcing “mass adoption” of the digital ruble could become a disastrous event for Russia, just like the Soviet Union’s huge experiments, such as Mikhail Gorbachev’s nationwide anti-alcohol campaign or the river reversal project.
To be sure, regulators haven’t decided whether the digital ruble will actually happen. Since publishing the report, the central bank has been collecting public feedback and plans to complete it by December 31. Nabiullina previously said that if regulators do decide to move forward with the CBDC, the first pilot could take place by the end of next year. (CoinDesk) |
