2022 was supposed to be the year of digital currencies in several countries at once. In China, the digital yuan was tested at the Olympics, in the Russian Federation and other countries, real tests began. When will digital currencies go mainstream?
The world has already become accustomed to cryptocurrencies, but another fashionable novelty is on its way: digital currencies of national banks (CNB), or Central Bank Digital Currency (CBDC). It is essentially a digital form of traditional fiat currencies. Along with printing banknotes and minting coins, Central Banks around the world can issue electronic tokens of the same denomination as the local national currency. This fundamentally distinguishes CVNB from decentralized and highly volatile cryptocurrencies.
The use of CBDC simplifies settlements both within the country and when trading with foreign companies, experts say. Also, digital currencies can change the structure of world trade and the economy. How and when will the ruble appear as a figure in the Russian Federation?
What is CBDC
As the name suggests, CBDC, or national bank digital currency, is a digital token whose value is pegged to the value of the government’s fiat currency. CBDCs are similar to cryptocurrencies, more like stablecoins – their value is also tied to the value of a currency or a commodity from the real world.
CDBCs are usually divided into two categories:
- “Wholesale”, or wholesale, are intended for settlements between legal entities.
- “Retail”, or retail, can be used to pay for goods and services by individuals.
Supporters of CBDC point out that the use of digital currencies will solve several problems at once: for example, such money is almost impossible to counterfeit, and if stolen, it is easier to trace. Also, CBDCs are considered by regulators around the world as an alternative to cryptocurrencies due to the ease of regulation and the lack of anonymous wallets.
As of February 2022, nine countries have launched CBDCs in one form or another on their territory: the Bahamas, Antigua and Barbuda, Saint Kitts and Nevis, Montserrat, Dominica, Grenada, Saint Lucia, Saint Vincent and the Grenadines and Nigeria. Another 78 states are at different stages: from project development to tests.
Start of tests in Russia
In our country, testing of the digital ruble was started in February of this year. For the user, the main difference between the digital ruble and non-cash rubles is that the digital ruble is available to the owner even when the Internet is turned off. Experts believe that the digital ruble can help deal with illegal transactions and theft of money from citizens’ accounts.
VTB and Promsvyazbank were the first to test the digital ruble. In total, the group of pioneers should include 12 banks: Ak Bars, Alfa-Bank, Dom.RF, VTB, Gazprombank, Tinkoff Bank, Promsvyazbank, Rosbank, Sberbank, SKB-Bank, Soyuz and Transcapitalbank.
With the start of the special operation in Ukraine and the imposition of sanctions in our country, there has been a surge in the popularity of cryptocurrencies. Only a few platforms agreed to support the sanctions policy – for example, OpenSea became unavailable for our countries and Belarusians. Most exchanges do not block wallets, stating that this would be contrary to the very idea of crypto. The largest exchanges Coinbase and Binance have even stated that they do not plan to disable access to their services to users from the Russian Federation.
According to experts, the digital ruble will also be popular if it is launched. The sanctions imposed on our country due to the situation in Ukraine not only did not prevent the experiment with a digital national currency, but, according to analysts, can accelerate its implementation. The New York Times writes that the digital ruble can be used to bypass checkpoints set by the US, the EU and other countries – for example, transferring money by banks. The digital ruble can be used in direct trade without prior conversion into dollars and without detection – similar schemes were previously tested by North Korea and Iran, the publication claims.
You can read about the status of digital national currencies and how sanctions will help them in the full version of the material on “Pro”.