For a long time now, there has been talk in Russia that we could use our own digital currency. In 2020, this issue was actively discussed at the highest levels, and since December 2021, the creation of a prototype digital platform has begun a kind of storage for the digital Russian ruble.
What is a digital ruble?
The digital Russian ruble is not a cryptocurrency! Cryptocurrency has nothing to do with the Central Bank of the Russian Federation or any other central bank, while it is not recognized in Russia, although there is now talk that this may be acceptable. Crypto has only part of the functions of money.
The digital ruble has a different status, it is fixed by the law “On the National Payment System” (No. 161-FZ) and the development of legislation for the use of the digital ruble is already underway, they plan to do this before the end of 2022.
The system is already being tested in pilot mode. Banks check how the mechanism will work, open e-wallets, issue e-currency, and make payments between project participants.
On February 15 this year, there was the first message about a completed payment in digital rubles between VTB banks and PSB. At the moment, VTB Bank has already successfully completed testing of the platform and is registered in a pilot project.
Now he has to go through a program prepared by the Central Bank of Russia. According to this program, transactions between individuals will be carried out until October 2022 in order to establish the process and track errors. Further, from October until the end of the year, operations with corporations will be connected.
TKB also successfully tested the program and worked out all the necessary scenarios with the participation of the digital ruble and was also included in the pilot project.
Now banks have to find out how much their mobile applications are able to implement the digital ruble in their work and adapt to this process. This is of key importance, because, as conceived by the Central Bank of the Russian Federation, the client should be able to use electronic currency by passing a simple single registration in any of the online banks connected to the system. The processes of transactions will be instantaneous and the user will immediately see the withdrawal or receipt of electronic funds.
Advantages of the digital ruble
What is the value of introducing digital rubles? Do they have a fundamental difference from non-cash money? What are the benefits and what are the risks for clients?
The concept of "digital ruble" describes Federal Law No. 259 "On Digital Financial Assets", which entered into force on January 1, 2021. However, it is more like a theoretical guide to the basic concepts of the "digital age".
It follows from this Federal Law that it will be possible to prove the fact of ownership of digital assets only if the relevant information was entered in the tax return of the owner of crypto assets. Registration of digital assets must comply with the requirements of the Central Bank, the recommendations of Rosfinmonitoring and the Federal Tax Service. How this will be implemented in life is still a question.
According to preliminary estimates, the digital ruble can acquire properties that have so far belonged to both forms: cash and non-cash. This will allow us to use it both as a financial asset, and as a token, and as an element in the terms of a smart contract.
Thanks to a single platform, the digital Russian ruble promises to make micropayments on the Internet more convenient. An increase in the speed of transaction processing is expected compared to the non-cash form. Technologically, the digital ruble should become more reliable than the processing of plastic cards with their magnetic media, chips, and PCI DSS restrictions. In this way, the threats of skimming - illegal copying of confidential information - will be eliminated.
The digital ruble
What are the disadvantages of the digital ruble?
The main concern for the digital ruble and other digital currencies is security. Denis Burlakov, CEO of fintech company RBK.money, noted that the regulator would need a significant investment in order to create a secure and stable digital platform.
This idea was supported by the deputy chairman of the board of Sberbank Stanislav Kuznetsov. According to him, the current level of cyber resilience in the banking sector is not high enough to cope with potential threats.
- Profile hijacking by hacking your personal account.
- Profile hijacking due to violation during identification.
- Using the same currency multiple times.
What are they going to do with the digital ruble next?
Representatives of the Central Bank said that at the next stage they will test different scenarios in a test format and improve the platform.
Stages of growth of the digital ruble blockchain ("Masterchain")
Sber Bank became the first major player in Russia to offer to become a technology vendor in the transition from non-cash rubles to digital ones. The company developed on its own initiative the MasterChain blockchain platform, its first version appeared back in 2017.
Sber Bank proposed to create a network based on the development carried out by the working group of the Association for the Development of Financial Technologies, in which, in addition to Sber, the Central Bank, Qiwi and Otkritie banks were also represented. They wanted to build a peer-to-peer blockchain network with controlled access, the interaction of nodes was planned to be based on a modified Ethereum protocol.
To solve this problem, it was proposed to create a single national network for the exchange and storage of financial information and entrust the MasterChain with the functions of automating financial transactions for network participants using built-in logic based on smart contracts. Sber bank was to become the operator of the new network.
In 2020, prototypes of new services appeared and testing of digital bank guarantees was carried out. In February 2021, the Bank of Russia discussed the creation of an online factoring platform for digital financial assets based on MasterChain.
With all the advantages of Sberbank's technology, possible risks were identified even at the development stage. Chief among them was weak cyber resilience . As Stanislav Kuznetsov, deputy chairman of the board of Sber Bank, said at the time, “the existing mechanism for cyber-resilience in the banking sector will not cope with the threats to the new form of currency.
The risks include theft of a user profile through hacking of a personal account or due to an identification error, reuse of the same digital currency in offline settlements, access to settlements with the digital Russian ruble of fintech companies.”
digital Russian ruble
Since 2017, Russia has been waiting for the appearance of digital money. At first, these were “dreams” about the appearance of cryptocurrencies in the public domain, primarily bitcoin and ether. Officially, they were not noticed, although the first crypto mats for exchanging bitcoins appeared in 2017 even in the center of Moscow.
After the SEC abandoned the imminent implementation of the digital dollar in the United States, the financial regulator in Russia put the introduction of the digital ruble on pause. However, the development of blockchain technologies in Russia has not stopped. After the law “On Digital Financial Assets” came into force on January 1, 2021, the appearance of a digital ruble became a matter of time.
Currently, the Central Bank of the Russian Federation is testing the created technology and built infrastructure. The appearance of the digital ruble can be expected as early as 2023.
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