Russian President, Vladimir Putin, recently approved a bill that designates legal tender status to a ‘digital Ruble.’
At the same time, the Bank of Russia has unveiled the digital Ruble’s logo and commission fees. From 2025 business-to-business transactions will cost $0.16 each, while individual customers will pay 0.3% of the total transaction sum when transferring to commercial accounts.
This move comes amid heightened impact of severe Western sanctions and rising inflation in Russia which has been further exacerbated by the ongoing war in Ukraine.
According to the bill, President Vladimir Putin has bestowed the Bank of Russia, the country’s central bank, with the legal responsibility of serving as the platform operator for the central bank digital currency (CBDC), known as the ‘digital Ruble.’ This designation grants the Bank of Russia the authority to oversee and manage the implementation of the digital Ruble.
Moreover, the bill includes clear legal definitions for users of the digital ruble and outlines the operational guidelines for banks within the new framework.
Despite receiving approval from President Putin, Russian officials have acknowledged that the widespread adoption of the digital Ruble will not occur for several years. In an interview with Forbes, Olga Skorobogatova, the deputy chair of the central bank, mentioned that it is unlikely for most citizens to gain access to online wallets for the digital ruble until 2025 at the earliest.
As of today, the Russian Ruble is regarded as one of the worst-performing currencies globally. The currency has been severely affected by the rapid increase in inflation, which has been further exacerbated by the imposition of sanctions by Western countries following Russia’s military actions in Ukraine which began in February 2022.
As of recent data, the exchange rate of the Russian Ruble stands at approximately:
- 90.6 Rubles to 1 U.S. Dollar
- 100 rubles to 1 Euro
Both chambers of Russia’s parliament, the State Duma and the Federation Council, have approved the bill related to the digital Ruble.
With the bill now enacted, the central bank of Russia has the authority to commence testing of the CBDC from August 2023 onwards.
The latest iteration of the legislation has several changes, particularly relating to non residents. Non residents have the right to carry out digital ruble transactions without restrictions. This contrasts with many other central banks that aim to limit foreign usage in the early stages. However, for Russia, a key driver is to enable an alternative payment system in the face of sanctions over its invasion of Ukraine.
The central bank is the operator of the platform and can authorize both domestic and foreign banks to participate. Non residents can access the digital ruble via a foreign bank, a domestic bank, and via the central bank directly where the law allows it.
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