Russia’s Central Bank Governor: CBDC Is Future for Country’s Financial System

Russia’s central bank governor, Elvira Nabiullina, believes that digital currencies will be the future of financial systems as the country’s economy moves more online.

Moscow published a consultation paper back in October on the feasibility of the digital ruble and is looking to launch their central bank digital currency (CBDC) by the end of the year. Nabiullina believes the transition to a CBDC would fill the demand for a fast and cheap payment system in Russia, she told CNBC news.

The consultation paper elaborates by pointing out the development of digital payments and access to a digital ruble will lower the cost of payment services. Additionally, remittances will be cheaper and promote healthy competition amongst financial institutions.

The idea is to jump-start innovation in retail payments and help the emergence of a digital economy. The entire system’s stability is also expected to increase, as users become less dependent on individual providers. Essentially, Russia is looking to inject some fresh blood and ideas into their economy in the form of a CBDC. Pilots and trials for the digital ruble could begin in 2022, says Nabiullina.

Advocates for sovereign digital currencies say they could promote financial inclusion and make cross-border transactions easier. Nabiullina, however, believes there are a number of hurdles standing in the way, before such inclusions could occur. Primarily, as she points out, if each bank does its own thing, how would they communicate with one another?

“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.

As it stands, cryptocurrencies still cannot be used as a payment method in Russia or be owned by public officials.

According to former U.S. Treasury official, Michael Greenwald, “What alarms me is if Russia, China, and Iran each create central bank digital currencies to operate outside of the dollar and other countries follow them.” He added that such a development, “would be alarming.”