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No extra interest: the Central Bank plans to make transfers in digital rubles completely free for Russians

Photo by Mohit Singh on Unsplash

Money transfers in Russia will be absolutely free for transactions with digital rubles. In turn, citizens will be able to recharge an electronic purse up to 300 thousand rubles per month. This was announced by Chairman of the Central Bank of the country Elvira Nabiullina on Thursday, April 20.

“This entire amount, as well as other wallet balances – for example, if you received digital rubles from someone else – you will be able to transfer yourself to another person without interest. That is at least three times more than now in the fast payments system,” Nabiullina told the State Duma during a speech.

According to her, the Bank of Russia wants to run trial tests of the digital ruble as soon as possible and is waiting for the relevant bill to be approved by deputies. The new form of money is expected to be tested first on real transactions with small amounts and a limited number of clients. Then – after analyzing the test results – the Central Bank will be able to offer the electronic national currency to a wider circle of those who want it.

“We believe that the digital ruble as a voluntary use of a new form of payments and settlements will be useful for citizens and give the prospect of building more efficient international settlements. By the way, we are working on this topic with our partners from other countries,” added the head of the Central Bank.

The Central Bank announced the development of electronic national currency in 2020. According to the idea of the Central Bank and the Ministry of Finance, the digital ruble should become the third form of money in Russia, and by 2030 it will be actively used along with cash and non-cash money.

“The introduction of the digital ruble will contribute to the further development of the payment infrastructure, increase competition and the spread of new innovative financial instruments, as well as increase accessibility and reduce the cost of services for citizens and businesses,” says the draft of the the strategy for the country’s financial market development until 2030.

Note that the Central Bank issues cash in the form of banknotes, each of which has a unique number, and non-cash rubles are records in the accounts of commercial banks. In turn, the digital ruble takes the form of a unique code stored in a special electronic wallet.

In this case, unlike cryptocurrencies, which are not secured by anything and have no single issuer, the digital ruble will be the official means of payment in Russia and will be issued on the platform of the Central Bank. People will be able to use such electronic money at their discretion and as they wish – along with cash and non-cash.

“Digital rubles, just as currently paper and metal money, will be issued by the Bank of Russia… Citizens, as now, will be able to choose which form of ruble to use – cash, non-cash or digital. The choice is entirely up to the individual,” said the Central Bank.

In general, the platform of digital ruble should greatly simplify the order of payments in the country and open new opportunities for citizens, businesses and the state. Andrey Rusetsky, Managing Director for Investments of MC PSB, shared this opinion with .

“For the population, digital currency will be a convenient settlement mechanism with additional advantages: operations will become cheaper, safer and more efficient. The state will be able to distribute address payments more easily and efficiently. Businesses and banks will be able to achieve greater transparency regarding the movement of funds, optimize processes and reduce transaction costs,” Rusetsky said.

Moreover, the introduction of digital ruble will allow the Central Bank and the government to better track the data on the condition of businesses, industries and the economy as a whole, said Alexei Fedorov, analyst of “TeleTrade”. Accordingly, according to the interlocutor of , the authorities will be able not only to provide financial support to businesses online if necessary, but also to guarantee the targeted use of each ruble.

In addition, the system will guarantee a higher level of protection of transactions, so the space for fraud with the digital ruble will be very limited, said Fedorov. At the same time, the launch of the new system will not lead to the beginning of “total surveillance” of Russians and their finances, the Central Bank assured.

“The amount of information about citizens in transactions with digital rubles will not exceed the amount of information that is already established for transactions with non-cash rubles. Information about balances on digital wallets and information about digital rubles is protected by bank secrecy in the same way as information about accounts in banks”, – said in a clarification of the Central Bank.

After the launch of the digital ruble, every Russian will be able to have one electronic wallet. It will be possible to do this through the mobile application of any bank.

To buy goods or services using digital currency it will be necessary to read a QR code through a cell phone, choose digital ruble as a payment method in the app and confirm the payment. In the future a new form of money it will also be possible to pay with contactless NFC technology, the Central Bank believes.

It should be noted that users will not be able to receive cashback when carrying out operations with digital currency. In addition, the digital rubles will not accrue any interest, and banks will be forbidden to lend them. In this case, the new form of money will not have an expiration date and its own separate rate.

Customers will be able to exchange digital rubles into paper rubles in two steps in the ratio of one to one. To do this, first you will need to transfer digital currency to the bank account or card, and then withdraw in the usual way at an ATM or cash machine of the financial institution. The reverse transaction will take place in exactly the same way.

“At one time, many doubted that the card system will be widespread in Russia, because cash transactions already worked fine. Nevertheless, today paper money transactions are rudiment of the old payment culture, and it is bank cards that have become the main payment instrument. I think it will take another seven or ten years, and the same will happen with digital rubles, because it is even more efficient payment system than the card system,” Alexei Fedorov suggested.

However, the Russian authorities are not going to withdraw cash and non-cash money from circulation in the future and force people to use only digital rubles, said the Central Bank. Moreover, there are no plans to transfer all state employees’ salaries and social payments to electronic currency either.

Meanwhile, according to Alexei Fedorov, the use of digital currencies in foreign trade will eventually allow Russia and many other countries to build an alternative to the dollar system of international payments. As a result, financial transactions will become inaccessible to sanctions of the U.S. or other unfriendly states, the expert believes. Anatoly Aksakov, head of the State Duma Committee on Financial Market, expressed the same point of view in a conversation with .

“We will negotiate with foreign colleagues. The Chinese, for example, already have electronic yuan, and they are actively working with it. The digital ruble is generally more effective at circumventing sanctions because transactions do not involve U.S.-linked correspondent accounts and banking systems. That is, the enemies will not see what transaction is carried out and, accordingly, will not be able to influence it,” – concluded Aksakov.

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