Cryptoruble: Will digital ruble help Russia bypass sanctions?
There is growing interest in cryptocurrencies in Russia of late following the plunge of the Russian ruble since the start of the country’s invasion of Ukraine.
According to Arcane Research, Russian citizens are “buying crypto like never before” to preserve their wealth, having seen the ruble lose over 20% of its value in the past month, as of 23 March 2022, amid economic sanctions from the West.
In this article we explore what is cryptoruble and how it works, and explain whether it’s a ruble coin crypto or a digital currency. We will also take a look at what the cryptorouble price would be, examine the roadmap to its development and look at factors that could shape the cryptorouble’s future.
What is digital ruble or cryptoruble?
Digital ruble, or cryptoruble, is an alternate form of the Russian national currency that will be issued digitally by the Central Bank of Russia (CBR). It should be noted that Russia has been developing digital form of its national currency since 2020.
On 13 October 2020, the CBR published A Digital Ruble, in which it outlined its plan to introduce a central bank digital currency (CBDC). At the time, the central bank took a patient tone saying that the topic “requires an extensive and deep study” and that it will develop a digital ruble “step-by-step”.
“The introduction of a digital ruble will be a major event for the economy and society in general,” said the report.
CBR clarified that the digital ruble is not a cryptocurrency ruble, but rather a fiat currency which will be a liability of the central bank.
How will digital ruble work ?
According to CBR, the digital ruble would work in the same manner as cash rubles. Citizens will be able to use digital ruble to pay for goods and services, make payments and transfer funds, among others. The digital ruble price will be the same as the cash RUB.
Digital rubles will come with unique identifiers, similar to serial numbers on bank notes. The Russian central bank also clarified that the digital ruble has not been developed as a replacement for cash and non-cash ruble. They added that digital rubles will make payments faster and safer, and will reduce the cost of payment services and remittances.
“While cash money is issued in the form of banknotes with unique identifiers and non-cash money exists as records in accounts with commercial banks, digital rubles will be represented as unique digital codes stored in special-purpose electronic wallets. In order to transfer digital rubles between users, the digital code will be transferred between their electronic wallets,” the CBR said.
Digital ruble transactions will be facilitated by its own payment infrastructure, which is currently under development and will be integrated into the existing ecosystem to expand payment options available to households.
According to the CBR, the digital ruble platform will be integrated with CBDC platforms of other countries to speed up and reduce cost of cross-border transactions.
The issuer is also planning to introduce the possibility of transacting the digital ruble in offline mode (without need for the internet), and looking into allowing the use of the digital ruble to non-resident customers.
In its consultation paper the CBR acknowledged that the introduction of a digital ruble will “influence the operational procedure of the central bank’s monetary policy” as there will be redistribution of funds between cash in hand, bank accounts and electronic wallets.
“The Bank of Russia will need to assess the impact of the introduction of a digital ruble on the monetary policy transmission mechanism, which includes rates and volumes of deposits and loans, when preparing macroeconomic forecasts, on the basis of which key rate decisions are made,” the central bank added.
Has the digital ruble been deployed?
In the original consultation paper issued in 2020, the Bank of Russia charted a seven-stage roadmap for the future of digital ruble. The first three steps included publication of the technical paper, public consultations and development of a digital ruble concept.
The next steps included development of a digital ruble platform, piloting the digital ruble with a limited number of participants and analysing results of the pilot program. Finally, the central bank would make a decision based on the results from preceding steps to decide on the launch of a digital ruble.
In April 2021, A Digital Ruble Concept paper outlined the key dates:
December 2021 – creation of a prototype of the digital ruble platform
January 2022 – development of draft amendments to the legislation of the Russian Federation
2022 Q1 – launch of testing of the prototype of the digital ruble platform
On 15 February 2022, the Bank of Russia issued an update, saying that the first digital ruble transfer has been completed on a prototype of the digital ruble platform.
The central bank said that three banks from its pilot group, which included the likes of VTB Bank and Gazprombank, have connected to its digital ruble platform and two banks have completed “a full cycle of digital ruble transfers between clients using banking mobile applications”.
The principal bank added that it plans to test operations for payment for goods and services in trade and service enterprises, payments for public services, implementation of smart contracts and interaction with the Federal Treasury.
“In the future, it is planned to introduce the possibility of paying in places without the Internet (offline mode), organise interaction with financial intermediaries and digital platforms, and provide for the possibility of conducting transactions with the digital ruble for non-resident customers,” the Bank of Russia added.
Digital ruble to bypass Western sanctions
Russia has been hit with a series of sanctions after it invaded Ukraine in late-February 2022, with both imports and exports banned in various categories, such as luxury goods and chemicals.
The US, UK and EU have targeted wealthy Russian businessmen who are considered close to Russian President Vladimir Putin, with asset freezes and travel bans.
More importantly, Western nations have targeted Russia’s revenue from oil and gas exports. While a complete ban on Russian oil has not been imposed, governments and corporations have been considering it.
Russia has not been able to use its foreign currency reserves, estimated at about $630bn, to protect the ruble against drops as the US, UK, Canada and EU have banned Russia from selling foreign currencies.
All of this makes the development of a digital ruble more important for Russia than ever before. In an October 2020 interview with Moscow-based newspaper Izvestia, Russia’s Ministry of Finance has said that digital currencies could increase “the ability to make cross-border payments”.
The press office of Russia’s Ministry of Finance told Izvestia that possible advantages of using digital currencies include “reducing dependence on the dollar and, as a result, reducing exposure to sanctions by third countries”.
It remains to be seen whether the digital ruble will help the Russian government reduce its dollar dependence. If Russia were to find partner nations willing to conduct transactions outside the global banking system by using alternate CBDC-based payment infrastructures, it would help the country sidestep Western economic sanctions.
When is the cryptoruble release date?
On 15 February 2022, the Central Bank of Russia issued an update saying the first digital ruble transfer has been completed on a prototype of the digital ruble platform. The central bank has charted a seven-stage roadmap for the digital ruble and has said the project “requires an extensive and deep study”.
What can you buy with cryptoruble?
According to the Central Bank of Russia, the digital ruble, also known as crypto ruble, will work in the same manner as cash rubles. Citizens will be able to use the digital ruble to pay for goods and services, make payments and transfer funds.
What is the future of the cryptorouble?
Cryptorouble, or digital ruble, has already been tested. The first transfer has been completed on a prototype of the digital ruble platform.
In the original consultation paper issued in 2020, the Bank of Russia charted a seven-stage roadmap for the future of digital ruble. The first three steps included publication of the technical paper, public consultations and development of a digital ruble concept.
