Russia Central Bank: Digital Currencies Are The Future Of Russia's Financial System. Image credit: iStock / inkoly
Russia’s central bank has said it is closely following developments in digital currencies with the intention of making them the country’s financial system medium of exchange.
Central bank digital currencies are not the same as decentralized cryptocurrencies such as Bitcoin. They are issued and controlled by authorities, and the value of one digital currency equals the physical cash of the same currency. By comparison, digital currencies such as Bitcoin can be sent from user to user on a peer-to-peer network without the need for intermediaries, a central bank or a single administrator.
Elvira Nabiullina, Russia’s central bank governor, told CNBC that as the Russian economy moves online, digital currencies, which offer a fast and cheap payment system, will be the future of its financial systems.
“I think it’s the future for our financial system because it correlates with this development of digital economy,” Nabiullina said.
Russian law enforcement has been monitoring bitcoin-to-fiat transactions closely, according to the country’s financial surveillance agency, Rosfinmonitoring. The agency is also looking at loopholes used by scammers and terrorists.
In October, the Russian government published a consultation paper on a digital ruble and it aims to have a prototype ready by the end of 2021. Pilots and trials could start next year, Nabiullina said.
A digital ruble is however seen as a threat to the U.S. dollar position as the central currency for international trade.
“What alarms me is if Russia, China, and Iran each creates central bank digital currencies to operate outside of the dollar and other countries followed them,” said Michael Greenwald, a former U.S. Treasury official.
Russia outlawed and criminalized cryptocurrencies until August 2020 when it signed a cryptocurrency law that allowed trading within its jurisdiction. However, crypto is still banned in Russia for use in exchange of goods and services.
The law allowed Russian banks to open up cryptocurrency exchanges under the supervision of the central bank.
Cryptocurrencies have a status of taxable property in Russia, with specific tax rules expected to become law.
Image credit: iStock / inkoly
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