Elvira Nabiullina, the Governor of the Bank of Russia, has disclosed that the central bank will only embrace a digital version of the ruble if it meets several conditions within pilot tests.
Nabiullina spoke on this matter before the State Duma Committee on Financial Markets on November 15. In her speech, Nabiullina said the Bank of Russia would test the digital ruble for over a year.
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According to Nabiullina, the digital ruble would be Russia’s third form of money. As such, the central bank intends to commence with the large-scale issuance of the digital ruble only if it easily converts into cash and non-cash versions. Additionally, it must maintain a one-to-one ratio with the ruble and serve as a fully-fledged currency without discounts.
The central banker added that the digital ruble should not affect Russia’s inflation. She further noted that the currency should not increase local inflation or affect it in any way. Reportedly, inflation in Russia has soared since the onset of the COVID-19 pandemic to hit a six-year high. For instance, it increased 8.1% in October. The Bank of Russia aims to decrease the inflation rate to 5% or 6% starting 2023.
Digital ruble prototype to launch in early-2022
This news comes after the Bank of Russia created the first pilot group to test the digital ruble in June this year. At the time, the central bank noted that it would complete developing the prototype in December and start testing it in January next year. The pilot program will run in several phases over the year. The group comprises 12 banks, including Ak Bars Bank, ALFA-BANK JSC, DOM.RF Bank, and VTB Bank
Offering updates on whether the Bank of Russia will indeed start testing the digital ruble in 2022, Nabiullina said,
We expect to have a prototype at the beginning of next year, then test it for at least a year, maybe even more will have to be tested, to see how it works and where it works.
Nabiullina spoke in front of the State Duma Committee on Financial Markets after Russian legislators released documents outlining the primary aspects of the country’s monetary policy for 2022, as well as the period between 2023 and 2024.
One of the documents noted that Russia is planning to embrace the digital ruble slowly and progressively by increasing the scope of use. While the Bank of Russia is concerned the issuance of a digital ruble might increase funding costs for banks and effectively compromise the transmission mechanism of the monetary system, it believes wide adoption would solve these issues.
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