Following the ban on cryptocurrency by President Vladimir Putin, the Bank of Russia is considering a unique pattern for its CBDC.
According to the central bank, it is currently deliberating on the possibility of launching a different type of digital Ruble for specific transactions. The proposed central bank digital currency (CBDC) would be called “targeted” or “colored” and limited to a particular use.
Bank of Russia Pitches a New CBDC
A statement from the central bank shows that the regulator is working on unveiling a new type of digital Ruble for retail use. The digital Ruble is expected to increase the availability of financial services to Russians. It will also help streamline cross-border payments.
According to the bank, it is forging ahead with developing the Digital Ruble, which will be rolled out by 2023. The new monetary policy indicates that the new CBDC is geared towards implementing a “targeted” technology.
This means that people would not use all their digital Rubles for transactions. In other words, retail traders would use a “targeted” or “colored” Ruble to pay for specific goods or products.
However, the Bank of Russia emphasizes that the targeting technology would enhance public transactions’ efficiency. Some of the areas likely to benefit from the technology are public procurement and government contracts.
Furthermore, the timeline for the CBDC implementation shows the regulator will do some real-life experiments with the digital Ruble. In addition, there would be transactions on the CBDC platform using smart contracts and fiat in 2023.
By next year, institutions providing credit services are expected to join the fray.
Digital Ruble to Expand Access to Financial Services
The Bank of Russia identified the new CBDC as the solution to cover the gap in the unbanked category in the country. Accordingly, the availability of financial services is nearly absent in remote areas. As a result, the digital Ruble would optimize the settlement cost for goods and services.
The new development comes from President Putin’s ban on digital assets across Russia. Payments in cryptocurrency are no longer tenable in the country, despite having one of the largest crypto holders in the world.
President Putin in July announced a ban on crypto payments across the country after a lengthy deliberation with the Bank of Russia.
Since Russia invaded Ukraine, the country has been barred by top crypto exchanges from accessing its services. The largest crypto exchange platform, Binance, announced that it is complying with E.U. and U.S. sanctions by limiting its services.
Russians staying in the country would not be able to access their wallets or make transactions. Russia has had complicated crypto legislation due to the lack of clarity by the government.
Following the country’s ban on international payments, the central bank said it would not object to using crypto for cross-border transactions.
The government regulator would issue the token and be able to receive payment in digital Ruble. Meanwhile, the offline mode for integrating financial institutions outside the banking system is scheduled for 2025.