In an effort to lessen the effects of the international sanctions imposed as a result of its offensive in Ukraine, Russia on Tuesday started the test phase of a digital ruble. According to AFP, “the tests of operations with real digital rubles began on August 15.” The pilot phase includes 600 people who can make payments at 30 sales locations throughout 11 Russian cities, along with 13 additional banks.
Long-term, according to the central bank, “operations will be free for citizens and with a low commission for businesses.” The second-largest bank in Russia, VTB, reported that it has successfully tested digital-ruble transactions via its mobile app.
Moscow’s venture into virtual money attempts to lessen the effects of global constraints on its banking system. Following the commencement of the Ukraine crisis last year, many Russian banks were barred from the widely used SWIFT system, prompting Moscow to try to dedollarize its operations and create other payment channels.
The digital ruble leverages blockchain technology, which enables direct transactions through a decentralized database, just as cryptocurrencies do. The primary distinction is that it is a “central bank digital currency” that is strictly regulated.
The FSB national security service oversees the system as the Russian central bank issues digital rubles that are stored in electronic wallets. Digital rubles, according to the authorities, will make payments safer, but some analysts perceive this as an effort by the Kremlin to better control its people.
Russia is now the 21st nation to begin a digital currency’s testing phase, according to analysts at the Atlantic Council. According to the central bank, Moscow anticipates that “by 2025 to 2027,” all Russians who desire it will be able to use the new currency.