The main problem of the digital ruble – lack of purpose for its creation

The Russian banking community and representatives of payment systems (Qiwi, Yumoney) sent the Central Bank their understanding onthe need for a digital ruble.In their opinion, the main problem of the project is the lack of a clear goal for creating a digital currency. According to market participants, all the goals stated in the Central Bank’s digital ruble project can be achieved using available means, and its implementation may jeopardize the liquidity of the banking system and the existence of the payment business.

In the report of the Central Bank published at the end of 2020four options for introducing the digital ruble have been proposed. After the first discussions with the banking community, there were two most likely implementation models. Under Model C, the regulator opens and maintains customer wallets on its digital currency platform.

Banks and financial organizations act inas intermediaries, initiating “opening customer wallets and making payments on them.” In model D, the Central Bank opens the wallet to the bank, which opens the wallet to the client, but in this case it is unclear in whose jurisdiction the wallet itself is located—the bank or the Central Bank.

According to bankers and payment systems, model C threatens the access of retail operators to the most massive payments of Russians - pension and utility payments.

Financial market representatives' opinionsthe potential benefits of introducing the digital ruble vary. Some believe that the ability to use offline mode (in the absence of mobile communication) will become one of the main advantages of the digital ruble compared to non-cash money.

Others are sure that there are few such regions in Russiaand the audience for the digital ruble is extremely limited there. In addition, it is suggested that digital currency may be relevant as a form of organizing financial social support for special groups of the population.

Most market players are convinced that digitalthe ruble may pose a threat to the liquidity of the banking sector. In a written response to the discussion of the digital ruble project, the National Financial Market Council stated:

«Introduction of the digital ruble and conversion of partnon-cash money into digital rubles will reduce the liquidity of the entire banking system, which will proportionally reduce the volume of potential credit resources in the economy as a whole. In addition, increased dependence on external sources to replace lost liabilities will lead to a decrease in the market stability of banks, especially those without state participation, and therefore to a decrease in the level of competition.

The Bank of Russia reported that it is planned to sum up the results of the discussion of the advisory report by the end of the first quarter.

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