Russia to Start Real CBDC Tests in 2023, as it Tries to Deflate the Ruble
2022.05.26 18:36
Russia to Start Real CBDC Tests in 2023, as it Tries to Deflate the Ruble
- The Central Bank announced that as of the second quarter of next year they will begin to execute the pilot project with real clients.
- The issuer is currently grappling with an unusual rally in the ruble that has forced politicians to cut interest rates for the third time this year.
As of April 2023, the Central Bank of Russia will begin pilot tests of the digital ruble with real clients and with the use of smart contracts, as announced this week by the vice president of the issuing body, Olga Skorobogátova, according to EFE, citing the Interfax agency.
“We plan to start a pilot project with real clients and real operations from April next year,” Skorobogatova told a meeting of the Association of Russian Banks. The Russian official explained that “most of the pilot banks participate with test operations.”
The pilot project also involves tests for the use of smart contracts, computer programs written in code that allow automatic compliance with the terms agreed between the parties without the need for intermediaries.
The Russian Central Bank announced a month ago that it was already testing the digital ruble prototype it had created with banks. The tests include the opening of digital wallets for bank customers and transfers between users.
The CBDC project has become a matter of high priority for the Russian government. After the invasion of Ukraine and strong Western sanctions, Russia has accelerated this project and relaxed controls on mining and the use of cryptocurrencies.
The governor of the BCR, Elvira Nabiúlina, has insisted that the central bank’s digital currency is not intended to replace cash but to complement it.
On the Flipside
- Russia plans to use its CBDC in international payments to lessen its dependence on the euro and the dollar.
On the other hand, the Russian Central Bank in an effort to control the strong appreciation of the ruble in recent weeks, after having fallen sharply in early March to lows of 150 per dollar, has cut interest rates by 300 basis points. On Thursday at 9:19 am (ET) the Russian currency was trading at RUB 63.6500 per dollar.
The key interest rate was cut by the bank on Thursday from 14% to 11%. This is the third cut the bank has made after raising the key rate from 9.5% to 20% in an emergency, following the invasion of Ukraine and economic sanctions imposed by Western powers.
The issuer argued for the interest rate cut citing lower financial stability risks, slowing inflation and the ruble’s recovery against the dollar and euro.
“The latest weekly data points to a significant slowdown in current price growth rates,” the CBR said in a statement issued on Thursday.
“Inflationary pressure decreases thanks to the dynamics of the ruble exchange rate, as well as the notable decrease in inflation expectations of households and companies,” it added.
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