The Central Bank of Russia announced that, together with other domestic banks and financial credit institutions, it will implement the “digitization of the ruble” in 2024 to solve the problem of being kicked out of SWIF by Western sanctions and unable to use the international payment and settlement system.
Russia is actively studying the “digital ruble”, hoping to completely replace SWIFT payments
The Central Bank of Russia announced that it will join other domestic banks and financial credit institutions to implement the “digitization of the ruble” in 2024 to solve a series of problems arising from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) kicked out by Western sanctions, including the inability to use international Payment settlement systems, inability to move funds outside Russia, etc.
Why “digitize the ruble” in 2024?
The Central Bank of Russia released a document on August 11 outlining the direction of monetary policy development in the next three years. One of the main tasks is to realize the “digitization of the ruble” within two years.
Russia is expected to issue the Central Bank Digital Currency CBDC (Central Bank Digital Currency) in 2024. It is reported that this move is not only to minimize the impact of Western sanctions, but also to cater for the 2024 Russian presidential election, allowing Putin, who has been in power for more than 20 years, to continue to serve as the top leader.
“Ruble Digitization” has launched its first test
The e-ruble was tested in a pilot phase in February this year. The central bank formed an e-ruble test team with 12 banks, including large Russian banks such as Sberbank, VTB Bank and Tinkoff Bank. The central bank said that it will unlock different functions of the electronic ruble year by year, covering a variety of categories from “business to government”, “government to business” to “person to person”, and expects to complete “consumer to consumer” or “consumer to consumer” in 2024. “Consumer-to-business” settlement test, and as soon as 2025, citizens will be able to enjoy the offline payment model through the electronic ruble.
The central bank expects that the use of the “electronic ruble” can effectively reduce settlement and transaction costs, and at the same time integrate financial platforms, financial credit institutions and exchange infrastructure to drive the development of cross-border business in the future.
What is SWIFT? Central bank admits being kicked out of SWIFT to accelerate ‘digitization of the ruble’
Earlier, Western countries used different sanctions to restrict or even prohibit the flow of Russian funds. The United States, Canada, the United Kingdom and the European Union also issued statements in the early days of the Russian-Ukrainian war announcing that Russia was expelled from SWIFT by Western sanctions.
SWIFT provides a secure payment system for cross-border transfers to more than 10 million banks and financial institutions in more than 200 countries around the world. More than half of Russia’s financial institutions are members of SWIFT. In other words, being kicked out of SWIFT is equivalent to cutting off all cross-border finance, which will severely damage the foreign investment and trade of relevant institutions.
In May 2022, the Deputy Governor of the Russian Central Bank Olga Skorobogatova publicly admitted that the economic sanctions imposed on Russia by Western countries are the main reasons for the Russian Central Bank to accelerate the study of the electronic ruble.