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The digital ruble: Economic sovereignty or enslavement?
The Bank of Russia's programmable digital fiat has received mixed reviews
The Bank of Russia revealed on February 15 that three banks have “successfully completed the first digital ruble transfers between citizens.” The transactions are part of a pilot program for Russia’s central bank digital currency (CBDC).
On the same day, central bank chief Elvira Nabiullina reiterated her demand for a blanket ban on cryptocurrencies. Coincidence or fate?
(The crypto debate is a separate article. Russia’s finance ministry says it wants regulation but not a complete ban, while the Bank of Russia apparently sees crypto as a threat to its beloved, centralized token. A “compromise” might entail limiting crypto investments based on income—which would probably make cryptocurrencies unobtainable for the vast majority of Russians. More on this later.)
Your humble Moscow correspondent is not a fan of the digital ruble. It sounds very scammy.
But we could be wrong. So we’ve compiled a selection of views for your consideration. One thing to note: Russia’s central bank says transactions will be free. Critics argue nothing has been set in stone so there’s no way to know. Another way of thinking about this is: even if transactions are free, it’s a programmable currency that can be “reconfigured” whenever the Bank of Russia chooses to do so.
The digital ruble: very hip?
Let’s begin with what Russia’s central bank is saying about its own digital token:
“The digital ruble platform is a new opportunity for citizens, businesses and the state. We plan that for citizens, transfers in digital rubles will be free and available in any region of the country, and for businesses this will reduce costs and create opportunities for the development of innovative products and services. The state will also receive a new tool for targeted payments and administration of budget payments,” said Olga Skorobogatova, First Deputy Chairman of the Bank of Russia. “During this year, we will test various scenarios and refine the digital ruble platform. In the next stages of platform development, we also plan to provide seamless interaction with digital platforms and digital ecosystems.”
Investor-guy Viktor Pershikov agrees, and is apparently excited about using the digital ruble to “control” transactions:
“For the state economy, there may be certain advantages from the introduction of the digital ruble. The digital ruble will solve a fairly large number of issues related, for example, to cross-border payments, which are quite expensive lately, including between partner countries. It will simplify the cost of financial reporting, accounting. In the end, with its help, we will be able to at least get a little closer to taking the economy out of the gray zone, because the tools that will be integrated into the digital ruble system will allow us to track transactions, control or prohibit them.”
Financial analyst Vladimir Sagalaev argues the digital ruble can be used to bypass sanctions:
In light of possible sanctions and a disconnect from SWIFT, the Russian government and the Central Bank of the Russian Federation may accelerate the introduction of the digital ruble to enable cross-border transactions.
The idea of digital currencies is not new, and other central banks around the world have similar plans for a government-run digital currency. […]
Of course, there is a risk that everything new and progressive is perceived with apprehension and caution, and some Russians will not be interested in the digital ruble, but, as they say, progress cannot be avoided, and this is only a matter of time.
Others are less enthusiastic
We’ve already written about why we think the digital ruble is seriously bad news.
Russia’s Free Press recently published a provocative article (“Monetary authorities are in a hurry to launch a digital ruble before the end of 2022: Why do we need electronic money if neither inflation nor poverty can be defeated by it?”) highlighting many of the concerns put forward by critics of this bold digital imitative:
The main argument of our monetary authorities is that the digital rubles will become “smart money” with the possibility of “programmability”, which will allow spending funds precisely on those projects for which they are allocated in order to avoid their misuse.
But neither the people nor the experts believe that officials in Russia are seriously concerned about the victory over corruption and embezzlement. […]
It would be naïve to assume that our monetary authorities zealously set about implementing an undertaking simply because it was fashionable. So, for some reason, they still benefit from the digital ruble… As a rule, they never voice the true reasons.
The article includes an interview with an analyst who notes that the digital ruble will not solve issues of inflation and has no obvious benefit (for citizens) when it comes to social payments.
Of course, both sides could be right: the digital ruble could shield Russia from sanctions, and also usher in soul-crushing levels of economic control and surveillance that will make life intolerable. Hooray.
Edward Slavsquat reports on all kinds of strange and overlooked Russia-related developments, from a secret location (“town”) outside of Moscow. Support our work—upgrade to a paid subscription!