The introduction of the digital ruble in Russia is planned as early as 2022-2023, and the financial sector has great prospects for it. This concerns the simplification of calculations, the acceleration of transactions and other points. We talked in detail about the features, pros and cons of innovation in this material . Now let’s dwell on the most exciting moments: the consequences of the introduction of the digital ruble, the risk of theft of funds (in more detail) and the likelihood of circumventing sanctions.
History of digital assets in the world
Plans to introduce a digital ruble in Russia appeared several years ago, but real action has been taking place over the past few months. At the moment, work is underway to test the tool, and in the near future it is planned to gradually introduce new money into the public sector.
The authorities expect that people will switch from classical cryptocurrencies to controlled virtual money. The forecast is based on existing experience, because Russia is not the only country that has “digitized” the monetary unit. Before it, several countries passed this stage, which we will dwell on in more detail.
The pioneers in this area were the Bahamas, whose Central Bank launched the Sand Dollar in the fall of 2020. Digital money was equivalent to one local dollar and controlled by the regulator. Funds can be used to pay for goods / services, make transfers, etc.
A year later, electronic money was launched in Nigeria. The new coin was called eNaira, and its issuer is the local Central Bank. Digital tokens run in parallel with fiat money, but stand out with faster transactions and lower fees. Anyone can use eNaira, including a foreigner.
In 2022, Jamaica announced plans to launch a digital currency. In 2021, the government of the country issued a small amount of the Jamaican dollar worth $1.5 million. It is planned that the emergence of new money will reduce costs and attract local citizens who are inaccessible to the banking sector to the financial structure.
When introducing the digital ruble, Russia looked to China, which occupies one of the leading positions in this area. Since April 2020, the digital yuan has been actively tested in the country, and the first test was launched in early summer 2021. Since the launch of the project, 20 million wallets have been opened for individuals and over 3.5 million for legal entities. In parallel, 200,000 people received 200 coins in the lottery. Other countries such as South Korea, UAE, France, etc. also took part in the testing process.
Testing of the digital ruble was launched at the end of 2021, and the work is currently entering the final phase. A mechanism is being created for the exchange of such coins between wallets, the possibility of interaction with other digital assets, for example, an electronic version of the yuan.
Is it possible to steal a digital ruble
The key issue related to the new electronic asset is its security. Today, the Russian Federation is embarking on the path of digital optimization, where public services are available through a computer, there is mobile banking, the ability to order food, pay for goods / services with a fingerprint, etc. In March 2022, the Yandex. Food”, but due to opacity and the risk of forgery, voting through the blockchain was failed.
The concept of the digital ruble differs from well-known cryptocurrencies and has a lower degree of protection. Even large companies in the Russian Federation and government agencies cannot be 100% protected from the actions of intruders. Against this background, there are suspicions about the safety of the new coin.
There are several points that experts note here:
- The digital currency “ruble” is on the Internet, which creates classic risks for it. The latter are associated with the leakage of confidential information, various manipulations and hacking by hackers. This means that users’ money is not 100% secure.
- To steal a digital Russian ruble, it is enough to hack the system, so the security and likelihood of theft will depend on the reliability of the installed protection and the security of the system as a whole. In this regard, cash is more secure.
- The structure of the new currency is little known, so the society will face a large number of “pitfalls” of difficulties that will arise when working with the system.
But there is another side to security:
- The Central Bank takes over the control functions of the digital ruble, which makes operations with such coins simpler and more controllable.
- If the money is stolen, it will be easier to track and find the scammer. In the future, you can take measures to prevent such cases.
- It is impossible to change the digital code of the ruble or the currency itself. This is due to the fact that the coin will not have a virtual or electronic, but a digital form. All transactions will be available for control by the regulator, and their forgery is excluded.
At the initial stage, it is planned to introduce the coin into the public sector, where there are more opportunities for testing, a large turnover and the ability to control costs. This minimizes the risk of fraud and theft of public money. Upon successful completion of testing, the new coin will be used in the legal sector.
Consequences and risks of innovation
News about the introduction of the digital ruble makes us think about the consequences of such a step. At this stage, it is not entirely clear how the system will look and work before it appears in the real financial sector. Based on the experience of other states, there are several risks of the emergence of a digital ruble for society, the economy and other areas.
Obtaining by the state of 100 percent control over ongoing operations. The Central Bank of the Russian Federation will be able to see all the movements of funds and 100% control of the flow. It is planned that each person will have an account with the Central Bank of the Russian Federation, and not with other commercial structures. Therefore, it is easier to keep operations under control.
The Central Bank of Russia receives a full package of powers. It issues a digital asset and is the only entity entitled to manage such instruments. Each such ruble is marked, as in the case of fiat money, which allows you to identify users and control payments.
The Central Bank of the Russian Federation receives unlimited control over the movement of money, which allows it to disable, block or cancel the account at any time. If you wish, you can close access to digital rubles in any bank to all those who disagree. For the same reason, assets are being introduced into the PRC to increase control over citizens. No wonder China is considered one of the most totalitarian republics.
Reducing the number of commercial banks
The monopoly of the Central Bank of the Russian Federation will have a negative impact on market competition. With the spread of the digital ruble, a monopoly will develop in Russia. As a result, the banking market and competition suffer. Residents of Russia will no longer be able to choose better terms due to the control of the entire sector by one financial institution.
Today the system works like this:
- A commercial bank requests money from the Central Bank of the Russian Federation.
- The funds received are transferred to the population.
- The conditions for customers are set by smaller banks, taking into account the current competition.
After entering the digital ruble of the Central Bank of the Russian Federation, the process will take place directly. As a result, the need for an “intermediary” is lost, so many commercial banks will be closed. With the development of digitalization, they may disappear altogether.
Decrease in the turnover of fiat money
The logical consequence of the introduction of digital assets is the gradual “withdrawal” of cash from circulation. This is also done to make it more difficult for citizens of the Russian Federation to hide profits from the state and receive them without paying taxes. Many will have to go out and work in the legal field.
In the gray market, the main focus is on cash, but with the development of digitalization, they will become a thing of the past. New RUB cannot be used to pay with an employee or apartment owner without legal registration. If this is done without special registration, representatives of the authorized bodies will have questions.
Possibility to enter prohibitions and restrictions
Given the current situation, it will be easier for the authorities to introduce various kinds of restrictions on users. This can apply to many areas:
- currency operations;
- making payments for goods / services;
- translations, etc.
Restrictions may apply to both ordinary citizens and business representatives. The same risks of a monopoly on the management of the financial sector, which were mentioned above, are created.
The risk of a split in society
In a situation where a digital ruble is introduced in Russia, a split may arise. It concerns not only the economic, political or national sector. It’s about civil society. The bottom line is that the development of the digital sphere allows you to control each person. A special system is being introduced, according to which citizens will receive points. Their number will directly affect the following points:
- type of collateral;
- the amount of benefits;
- features of employment, etc.
Citizens of the Russian Federation are unlikely to feel the difference between digital and non-cash currency, but the state will benefit from this. It will receive a powerful transaction control tool and will know detailed information about the movement of funds.
Is it possible to bypass sanctions with the help of the digital ruble
One of the reasons for the appearance of the digital ruble in the Russian Federation is the desire to circumvent the sanctions imposed by Western and other countries. During the check, the resistance of new coins to external influences was taken into account. Operations with such money are invisible to users who do not participate in them. This technology has been appreciated by many companies that want to bypass transactions and control from Western structures.
In general, the possibilities of the digital ruble platform create good prospects for business without control from European banks. Another form of money is emerging, which will be under the full control of the Central Bank of the Russian Federation. For comparison, cryptocurrencies cannot boast of such a feature, because they are completely anonymous.
Will there be Bitcoin after the appearance of the digital ruble
The situation with the blocking of cryptocurrency assets and the closure of access to major exchanges creates additional opportunities for the development of internal technology. At the same time, the legalization of cryptocurrencies is unlikely to help with the solution of the problem. At the same time, there are discussions about the legalization of mining. The latter factor is especially relevant for regions with cheap and abundant electricity.
There is another group of experts who consider the digital ruble an unnecessary invention. It is important to understand that this is not a cryptocurrency and it does not have the main value in the form of independence from the financial sector. This means that the cost of new coins will be pegged to the regular ruble and will not rise in price.
It should be understood that Bitcoin and the digital ruble are different instruments that can exist in parallel to each other. New coins, which are controlled by the Central Bank of the Russian Federation, will be used as a means of payment. Cryptocurrencies, if they are not legalized, will retain their current role. They will be used for investment or capital preservation.
Experts note that it is useless to compare cryptocurrency and digital ruble. They differ financially and economically, obey different laws and perform some of their functions. At the same time, one coin should not be allowed to replace another.
The task of the digital ruble as a token is to increase the transparency of operations, reduce the time of transactions and reduce corruption. Cryptocurrency retains other qualities, focused mostly on the anonymity of payments. These two units will be able to harmoniously combine in the digital registry.
Using only cryptocurrencies to circumvent sanctions is an unjustified decision. This is due to low transaction volumes against the backdrop of overall Russian exports/imports. For example, the total capitalization of digital assets is about 1.5 trillion dollars, the turnover of goods in Russia is more than half of this amount. In addition, the main transactions are concentrated on exchanges, which is not very convenient.
In anticipation of the introduction of the digital ruble in Russia, you need to understand the consequences of such a step. The appearance of an internal “token” will be invisible to ordinary citizens from the standpoint of convenience, but will expand the powers of the Central Bank of the Russian Federation. This allows you to establish total control over citizens and legal entities, quickly block accounts and regulate financial flows. At the same time, the appearance of a coin simultaneously with cryptocurrencies can become a good platform for circumventing existing sanctions.
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