ALBAWABA - The fundamental law governing the launch of the "Digital Ruble" in Russia came into effect today, starting from the first Tuesday of August 2023, serving as another means for payments and transfers and forming a third type of national currency alongside the cash Ruble and the virtual Ruble.
This development follows the approval of the fundamental law by the Russian Federation Council on July 19th of the previous year and the subsequent signing of the law by President Vladimir Putin, along with the launch of a dedicated electronic platform by the Central Bank on the same month's 24th day.
The mentioned law defines key concepts and establishes the regulatory and operational frameworks for associated transactions while specifying the responsibilities and the Central Bank's role as the primary operator.
The "Digital Ruble" is a unique symbol stored in an electronic wallet created by users through the dedicated platform managed by the Central Bank.
As an "additional means of payment," the "Digital Ruble" cannot be used to open deposits, earn interest on digital wallet balances, or obtain loans.
Transactions and transfers using the "Digital Ruble" are free for Russian citizens, while businesses are subject to a 0.3% fee on payments or transfers.
The economic impact of using the "Ruble" in transactions within Russia is expected to become evident this month, with its full implementation following legislative approval.
Russians are relying on the "Digital Ruble" to enhance transparency, combat illegal financial operations, and contribute to the fight against corruption and unofficial transactions.
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What Are the Advantages of the "Digital Ruble"?
Mazen Salhab, Chief Market Strategist for the Middle East and North Africa region at BDSwiss, stated to "Economy Sky News Arabic" that the introduction of the Digital Ruble is primarily a political decision by Moscow aimed at avoiding the repercussions of sanctions imposed on it in global trade and transactions. He emphasized that it is a step taken in response to Western sanctions.
He added, "The Russians also aim to strengthen the Ruble, which has depreciated by approximately 58% against the dollar over the past year and lost 29% against the US currency since the beginning of this year (2023)." Salhab explained that when the Digital Ruble operates within a centrally controlled framework, Russia can control the pace of trading to minimize the Ruble's exposure, potentially reducing losses for the Russian economy in 2023.
Salhab noted that the Digital Ruble operates under the supervision of the Russian Central Bank, regulating transactions and transfers within Russia and creating digital wallets. Individual operations are free, while businesses are charged a 0.3% fee on transfers. The Digital Ruble will not be used for investment operations, but exclusively for various sales, purchases, and transfers. This allows Russians to regulate trading pace and potentially mitigate future currency devaluation.
Responding to the question of whether the Digital Ruble will be used "outside of Russia," Salhab suggested that it would initially be used within Russia but might be used later with countries that align with Russia in this regard, including China and India. He pointed to previous agreements to use national currencies (…).
He continued, "Perhaps Russians aim to expand bilateral exchange with countries aligning with them in this step, in addition to increasing Ruble trading value in global markets, evading sanctions, and escaping US dollar dominance."
The law regulating the "Digital Ruble" also addressed the introduction of digital currencies by foreign countries, defining the concept of "foreign currency," which also includes the national digital unit of a foreign country issued in digital form.
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Reducing Dependency on the Western System
Ramie Al-Qalubi, a visiting professor at the School of Oriental Studies at the Higher School of Economics in Moscow, emphasized that the Digital Ruble is part of Russia's efforts to reduce its reliance on the Western financial system, especially after several major Russian government and private banks were disconnected from the SWIFT global financial transfer system.
He stated, "Russia has decided to create its digital platform, operated by the Central Bank, to avoid being affected by Western sanctions or any Western actions." He also stressed that the Digital Ruble is not an unbacked cryptocurrency, as is often the case; instead, it is an official currency issued by the Russian Central Bank, which helps it replace SWIFT in some transactions.
Al-Qalubi explained that this provides three forms of Russian currency (cash, non-cash, and digital), offering various payment and transfer options similar to physical currency or bank account balances.
Differences Between the "Digital Ruble" and Cryptocurrencies
Ahmed Mati, CEO of VI Markets, explained the differences between these types of digital currencies (like the Digital Ruble) and cryptocurrencies to "Economy Sky News Arabic."
Mati said, "Central Bank Digital Currencies (CBDCs) are issued by central banks and function similarly to cryptocurrencies, but central banks manage them, unlike cryptocurrencies, which are issued by companies or individuals, with no regulatory oversight, unlike CBDCs issued by countries."
He added, "As a result, CBDCs are more secure, and they are not traded and speculated on like cryptocurrencies based on this aspect."
Another significant difference between CBDCs and cryptocurrencies is that the former (currency issued by central banks) has a gold backing, unlike cryptocurrencies, which lack backing and therefore have lower security, according to Mati, who also said, "National currencies enjoy trust as they are subject to the management and oversight of central banks, unlike cryptocurrencies, which suffer from a lack of trust, especially since some of them face insolvency."
