Digital Dawn: Russia Prepares for the Launch of Central Bank Digital Currency, Digital Ruble, by August 1, 2023

Russia is making strides in its digital currency initiative with concrete steps towards the introduction of the digital ruble, the nation's own Central Bank Digital Currency (CBDC), expected to come into circulation by 2025. This leap forward follows the State Duma's, the lower chamber of the Russian Parliament, recent adoption of a law introducing the digital ruble. The law now awaits approval from the Federation Council, the upper house, and a final sign-off from the president.

In compliance with this legislation, the Central Bank of Russia will take the reins as the operator of the digital ruble platform. The bank will also oversee the security and round-the-clock operation of the platform, along with the digital ruble circulation.

The platform will serve as the emission hub for the digital ruble, with commercial banks playing the role of intermediaries between the Central Bank and private individuals or companies. These commercial banks will open digital wallets for clients on the platform and carry out transactions. Looking forward, the Central Bank is promising a technology to facilitate offline operation of digital wallets.

The digital ruble is anticipated to offer more traceability compared to existing non-cash payment solutions, making it easier to track payment chains and identify deal participants. Despite these perks, the digital ruble will primarily function as a medium of payments and transfers, ruling out the possibilities of opening deposits or taking loans in this digital currency.

With the specifics of the digital ruble platform's operation still in the pipeline, the Central Bank has revealed that private individuals will not pay fees on payments or transfers in digital rubles. However, companies will bear a fee of 0.3%.

While the law comes into effect on August 1, 2023, the actual launch of the digital ruble is scheduled for 2025. The interim period will be spent on running pilot projects for a select group of customers and limited types of operations.

Russia's cautious yet strategic approach to the digital ruble has been a lengthy one. Initial discussions began a few years ago, and the concept was first mentioned by Elvira Nabiullina, the governor of the Central Bank, in October 2020. Prototype plans were disclosed in March 2021, and the subsequent year saw announcements to run "pilot transactions" in 2023.

Despite these advancements, Russia's position on cryptocurrencies remains unchanged, with trading or payments in cryptocurrencies still banned. An incoming draft law 'On Crypto Currencies' seems to maintain the ban on crypto payments. However, there's a potential provision allowing the use of cryptocurrencies for foreign trade transactions, run by Russian banks and reserved for authenticated customers.

As for the digital ruble, its beneficiaries are yet to be clearly identified. However, tech-savvy companies capable of leveraging distributed ledger technology, the foundation of the digital ruble, might stand to gain. These companies could potentially harness smart contracts for automatic, efficient, transparent, and cheaper transactions. Despite the promising prospects of the digital ruble, the industry still harbors skepticism due to potential counterfeiting risks and the perceived similarity to existing non-cash payment systems.