The Bank of Russia's plans to introduce the digital ruble next year, but the release so far caused more fear in the financial community than bright hopes. This conclusion can be drawn from the results of the first discussions of the Report of the Central Bank "Digital Ruble" by representatives of the financial market, held on Monday. 

The digital ruble will force banks to adjust their business models, improve non-cash payments, but at the same time will not become a threat to the very existence of credit organizations - banks both existed and will exist, will simply improve banking services and increase customer satisfaction.

Photo by Michael Parulava on Unsplash

What is being discussed?

So far, two models of the implementation of the digital ruble are being discussed. The first provides that the Bank of Russia itself opens digital wallets to all customers, including citizens. The second is that it essentially assumes that digital money should be distributed in the same way as paper money: the Central Bank will supply them with banks, and those - to open accounts to their customers.

Banks prefer the model, where the regulator opens wallets for banks, and they withdraw the currency to their customers already through individual wallets associated with personal accounts, notes the chief analyst of Alor Group Alexey Antonov. In this case, the Central Bank will monitor the calculations on the digital ruble not directly, but through banks, then for banks, the level of responsibility will be even higher, but at the same time, the banking sector will be able to receive additional profits for such operations.

If they implement the scenario under which the Central Bank will independently regulate the circulation of this currency and create a platform through which it will open wallets to customers, then for banks it will mean the outflow of liquidity to this new system, the expert believes.

Problems associated with the release

However, experts also mention fundamental problems and opportunities related to digital money. If some of the cash is transferred to the digital currency of the Central Bank, the turnover of these funds can be increased, they can be used with the help of the non-bank sector of the financial market. The result of the introduction of the digital ruble will be the possibility of transactions, wider distribution of e-commerce transactions, reduction of commissions, and reduction of the total value of transactions for all participants in the system.

Advantages and disadvantages

From the point of view of insurance companies, the main advantage of the introduction of the digital ruble may be the simplification of identification. "This will help reduce the cost of maintaining agency channels in remote areas. In addition, temporary restrictions on payments are being eliminated, receivables are reduced.

At the same time, representatives of the financial industry expressed a number of concerns related to digital money. First of all, about who will pay the costs of introducing digital ruble.

There is also not related to the technical aspects, but an important nuance of the introduction of the digital ruble. As ridiculous as it may sound, people must be convinced that this is not a confiscation. The people have a strong genetic memory, so this project should have competent information support.

Why do people need digital rubles?

The digital ruble will be able to make payments even faster, easier, and safer. The development of digital payments, equal access to the digital ruble for all economic agents will lead to a decrease in the cost of payment services, remittances, and increased competition among financial institutions. This will stimulate innovation in retail payments as well as in other areas and will support the development of the digital economy. And reducing the dependence of users on individual providers will increase the stability of the country's financial system.

What are the other advantages of digital ruble?

The use of cashless money has been on the rise in recent years. The digital ruble can be a convenient new additional means of payment for both buyers and sellers, including in remote, sparsely populated, and hard-to-reach areas where access to financial infrastructure is limited. The digital ruble will increase the coverage of the population with financial services, which will become more accessible, which will eventually improve the quality of life of people.

The national digital currency will also limit the risk of redistribution of funds to foreign digital currencies, contributing to macroeconomic and financial stability.

How can transactions with a digital ruble be arranged?

For citizens, transactions with digital rubles may be similar to the use of electronic wallets, payment or mobile applications. Transactions with the digital ruble will be conducted both online and offline. For offline transactions, without access to communication networks, users will be able to pre-reserve a certain amount of digital rubles in their e-wallet, just as they now take cash with them when they go to places where payment cards may not be accepted. And online transactions can be carried out similarly to non-cash payments.

The digital ruble is likely to be released the next year, however, everything needs to be accurately calculated and there will be certain complications initially.