Putin Signs CBDC Bill, Allowing the Bank of Russia to Launch a Digital Ruble – Which Country Will Create a CBDC Next?

Russian President Vladimir Putin has signed a bill into law that will adopt a “digital ruble” as legal tender.

The move gives legal authority to the country’s central bank, the Bank of Russia, to act as the platform operator for the central bank digital currency (CBDC), according to an official document.

The bill also outlines definitions for users and provides guidelines for banks to operate under the new framework.

The digital ruble, which has been under consideration by the Bank of Russia for some time, will be integrated into the existing payment system alongside traditional payment methods.

As per the amendments to Russia’s Civil Code, digital ruble accounts will be managed by the central bank itself.

This bill, which completed its final hearing on July 11, has been eagerly awaited and will now allow the Bank of Russia to commence tests of the CBDC starting August 1.

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Russian citizens will be able to make payments and transfers directly from their digital wallets, which will be hosted within the central bank’s platform or that of its partner banks.

However, the CBDC will be restricted for use in payments or transfers only, and cannot be utilized for loans or deposits, as specified by the central bank.

Digital Ruble Found Momentum After Heavy Sanctions

The idea of a digital ruble has been circulating within Russia for several years, but gained momentum following the imposition of heavy sanctions by the United States and its allies, isolating Russia from international financial markets.

The urgency to bring the CBDC online escalated earlier this year, resulting in the rapid passage of this bill through both houses of Russia’s parliament—the State Duma and the Federation Council.

Anatoly Aksakov, the head of the parliament’s committee on financial markets, emphasized that the digital ruble will provide additional control over the ways in which private citizens can spend their funds.

For instance, parents will have the ability to monitor and regulate their children’s spending habits, as Aksakov explained in an interview with Parlamentskaya Gazeta earlier in July.

The development of the digital ruble has been a long process for the Bank of Russia.

In 2020, the central bank released its first analytical report on the topic, incorporating feedback from Russian banks and other financial market participants.

This was followed by pilot tests with several Russian banks in February 2022.

However, the outbreak of the war in Ukraine further heightened the need to implement the digital ruble to mitigate the impact of Western sanctions.

With the signing of this bill, Russia takes a significant step towards joining the growing list of countries exploring and implementing their own CBDCs.

98% of Global GDP is Exploring a CBDC

Russia’s launch of a CBDC comes as 130 countries, representing 98% of global GDP, are exploring a CBDC, according to the CBDC tracker by American think tank the Atlantic Council.

Furthermore, 19 of the G20 countries are now in the advanced stage of their CBDC development, according to the CBDC tracker. Of those, 9 countries are already in the pilot.

The report also revealed that almost every G20 country has made significant progress and invested new resources in CBDC projects over the past six months.

Meanwhile, a total of 11 countries have fully launched a CBDC, with China leading the pack.

China’s pilot, which currently reaches 260 million people, is being tested in over 200 scenarios, some of which include public transit, stimulus payments, and e-commerce.

The Bahamas, Nigeria, Anguilla, Jamaica, and seven Eastern Caribbean countries have also fully launched their CBDCs.

Furthermore, India and Brazil plan to launch their CBDC project in 2024, with Australia, Thailand, and Russia being in the late phase of pilot testing.

Likewise, the European Central Bank (ECB) has finalized prototypes for a digital euro as it prepares to take a decision later this year over whether to develop the EU’s fiat currency in a new format, the central bank said in a press release back in May.

At the time, the ECB said its potential CBDC can be designed to boost innovation but expressed skepticism about using Web3-style distributed ledger technology and smart contracts.

Meanwhile, the United States has no confirmed plans to launch a digital currency.

However, the country has been moving forward on a wholesale (bank-to-bank) CBDC.

Since Russia’s invasion of Ukraine and the G7 sanctions response, wholesale CBDC developments have doubled. There are currently 12 cross-border wholesale CBDC projects.

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