Prior to the start of the conflict, Russia had already tested its digital ruble in at least 12 financial institutions. Some analysts already consider that the digital ruble was Vladimir Putin’s “ace up his sleeve” to avoid the impact of economic sanctions, despite the Russian Central Bank’s refusal to speed up its implementation.
Economic sanctions are a powerful tool for dealing with this type of conflict. The United States and Europe have confirmed that in the coming days, Russia will feel the first blow to its economy, which in some aspects will have an immediate effect, and in others will force the Russian Central Bank to take exceptional measures. One of them is the possibility of using its gold and dollar reserves to prevent its currency from collapsing even further than it has done so far. But, in addition, the government itself is beginning to move towards the possibility of bringing forward the launch of the digital ruble, as an alternative to reduce the economic impact.
When Russia invaded Crimea in 2014, the economic sanctions caused Russia to lose US$50 billion a year. However, Russia seems to have learned a lesson: it has diversified, reducing its holdings of US Treasury bonds and dollars. The euro and gold account for a larger share of Russia’s reserves than dollars.
Russia has long been preparing its own official cryptocurrency, an alternative to escape sanctions. They recently completed the prototype of this currency in December 2021 and the first tests have already been carried out.
Regulation of cryptocurrencies seems to be on the way in this country, although there is dissent between the Bank of Russia (which would prefer to ban mining and cryptocurrencies) and the Russian central bank, which is pushing for the digital ruble. This move is similar to that made by China, which has also been preparing its own digital yuan for months.
Russia is in fact one of the main supporters of cryptocurrency mining. The latest data suggest that it controls 12% of all cryptocurrencies, which seemed to be a compelling reason to avoid banning this activity.
The Bank of Russia announced last week that it had officially launched its CBDC trial, and that the first digital transfers of rubles between citizens had already been carried out with great success. During the tests, customers not only opened digital wallets using the mobile app, but also exchanged non-cash rubles for digital ones. The mechanism for transferring digital rubles between accounts was then tested.
Three of the 12 financial institutions participating in the Bank of Russia’s CBDC pilot programme have already integrated the digital ruble into their platforms. There is still a second stage that will involve testing digital ruble payments for goods and services, as well as the implementation of smart contracts and interaction with the Federal Treasury. In a third stage, the Bank of Russia planned to facilitate offline CBDC payments and allow non-residents to make digital ruble transactions as well.
