Bank of Russia Governor: CBDCs and Cash Will Coexist

In a press conference held on 15 September, Elvira Nabiullina, the Governor of the Bank of Russia, made it clear that cash remains a steadfast component of the Russian financial landscape. Amid the backdrop of ongoing tests and developments surrounding the digital ruble, Russia’s central bank digital currency (CBDC), Nabiullina emphasised that the institution had no intentions of eliminating physical cash. Instead, the primary focus is to empower Russian citizens with a broader spectrum of payment options.

The Bank of Russia’s Digital Ruble Role in Payments

Nabiullina’s statement, as reported by the Russian state-owned news outlet TASS, encapsulated the central bank’s stance: “Our fundamental position is that people should be able to choose how to make payments. We are presenting choices.” In essence, the Bank of Russia is committed to ensuring that individuals retain the liberty to select their preferred payment methods, and traditional cash will persist as a viable option. The Governor underlined that cash’s relevance would endure, given its continued demand, and even revealed plans for a fresh series of banknotes with a redesigned aesthetic.

The Bank of Russia has clarified that the digital ruble is not intended to supplant conventional bank accounts or deposits. To prevent any perception of direct competition, the central bank has imposed limits on the amount of digital rubles that users can store in these accounts. Moreover, funds parked in digital ruble accounts will not accrue any interest, differentiating them from conventional savings or deposit accounts.

The primary utility of the digital ruble is envisaged as a tool for facilitating both local and cross-border settlements. Anatoly Aksakov, Chairman of the State Duma Committee on Financial Markets, has projected that cross-border payments using the digital ruble will become commonplace by 2025. To facilitate local transactions, the Russian CBDC will implement a QR-based payment system. Additionally, offline payments will be possible through the transfer of funds to a separate wallet, a feature expected to undergo testing during the second phase of the digital ruble pilot program in 2024. Nabiullina has expressed her anticipation of the digital ruble achieving mainstream adoption by 2025.

The Coexistence of Digital Currencies and Cash

Central Bank Digital Currencies (CBDCs) represent a great technological leap in the realm of finance and payments. They offer a host of advantages, including heightened efficiency, reduced transaction costs, and enhanced financial inclusion. However, the advent of CBDCs does not necessarily signal the demise of physical cash. These digital currencies, like the digital ruble, coexist harmoniously with physical cash and electronic payment methods, broadening the array of choices available to consumers for conducting transactions.

The future trajectory of cash’s usage hinges on multiple factors, including individual preferences, societal acceptance, and the pace of digitalisation. In some regions, cash usage has been on a steady decline, a trend that CBDCs may accelerate. Nonetheless, physical cash retains a pivotal role in specific transactions and serves as a contingency payment option during crises when digital infrastructure may falter. Consequently, CBDCs are envisioned to coexist harmoniously with cash in the foreseeable future, offering a diverse array of payment options tailored to the multifaceted needs and preferences of society.

While Central Bank Digital Currencies represent a transformative shift in the financial landscape, they are unlikely to sound the death knell for cash. Instead, CBDCs are poised to complement physical currency, providing consumers and businesses with greater flexibility and choice in navigating the intricacies of transactions within an increasingly digital economy. This coexistence promises to be a testament to the adaptability and versatility of modern payment systems, catering to the diverse financial needs of individuals and businesses alike. As the digital ruble continues its development journey, it is poised to play a pivotal role in this evolving landscape, offering a glimpse into the coexistence of digital innovation and the enduring relevance of traditional cash.