CBDC Will Put Private Banks Out of Work, Says Russian Official

The digital ruble will make commercial banks mostly useless, according to the Russian official. The change will happen gradually and transfer the control over the money system into the hands of central banks.

Digital ruble, digital rouble

Central bank digital currencies (CBDCs) have long been recognized as a threat to privacy and freedom. Less has been said about how they will affect the operations of commercial banks.

Anatoly Aksakov, the chief of the State Duma’s (the Russian Parliament) banking committee of the Russian Parliament, remarked that the role of private banks will gradually decrease with the development of blockchain technology. He made the statement on Tuesday at the panel discussion held by Argumenty i Fakty, a Moscow-based weekly and publishing house.

As a measure of consolation, Aksakov added that existing banks will find a new role for themselves within the digital ruble system as part of the CBDC infrastructure, implying that the transformed financial market will not accommodate new banking entities in the traditional sense. – The traditional role of the banks will gradually fade away – he said. It’s hardly a consolation, though, for those who detest the contemporary banking system. The CBDC puts the whole control over the money supply and issuance in the hands of central banks and respective governments.

On August 1 this year, Russia launched digital ruble payments after adopting the law allowing the issuance and use of the CBDC national currency. The rules for digital ruble transactions have been approved by the Bank of Russia Board of Directors. According to the current regulations, CBDC transfers and payments are free for individuals and are charged a 0.3% fee per transaction for businesses accepting payments.

On August 15, following nearly three years of research and exploration, the “robot ruble” – as it’s often called in Russia – entered the pilot phase for consumer transactions. The program is run in partnership with thirteen commercial banks and thirty retail shops in eleven Russian cities.

With its digital ruble pilot, Russia has joined the growing league of countries steadily heading down the CBDC path. They include some of the world’s biggest powers in terms of economy but not so much in terms of democracy, namely China, India, Iran, Turkey, Saudi Arabia, Malaysia, and South Africa. However, countries like Australia, Sweden, and Japan, considered free market and open society-friendly, are also well-advanced in the CBDC framework development.

According to data from Atlantic Council, CBDC has already been launched in eleven countries, the largest one being Nigeria and the remaining ten mostly Caribean islands, including Jamaica, most probably testing grounds for bigger Western economies.