Going Digital will Boost Rouble's Global Role, Russia Says

Russia’s central bank first floated the idea of the digital rouble last October, saying it could be issued on top of existing cash and non-cash roubles to facilitate payments.

As physical cash use falls globally, authorities around the globe want to fend off the threat to their money-printing powers from the likes of the cryptocurrency bitcoin or the Facebook-backed Diem, formerly Libra.

Fearful of the private sector stepping in to facilitate payments in unregulated ways, seven Western central banks including the U.S. Federal Reserve and the European Central Bank have teamed up with the Bank for International Settlements (BIS) to explore so-called “central bank digital currencies”.

They do not, however, include China’s central bank, which has advanced the farthest by piloting a digital renminbi, hoping to erode the dollar’s domination of international payments.

Ivan Chebeskov, head of the financial policy department at the Russian Finance Ministry, said the digital rouble would compete with other digital currencies.

“China’s example shows that they want to use their digital currency as a tool for international settlements, to strengthen the yuan globally,” he told a meeting at the Russian Union of Industrialists and Entrepreneurs.

“If we make the digital rouble more attractive than other world digital currencies, maybe we will increase the competitiveness of the rouble in international settlements in general.”

He said it would also make transactions more transparent, allowing for “total control” of budget spending.

Russia has for years wanted to roll back the dollar’s dominance, notably after the West imposed economic and financial sanctions on Moscow in 2014 for the annexation of Crimea and its role in the Ukrainian crisis.

But potential users were cautious.

“For a currency to be competitive, there needs to be a competitive economy. And, unfortunately, if the rouble turns digital, it won’t stop being the rouble,” Vladimir Kozinets, head of treasury and risk management at the car dealership Rolf, told the same meeting.

The rouble has weakened sharply in the past few years, trading at around 74 to the dollar compared with around 33 before a crash in the price of oil, Russia’s key dollar-earning export, and Western sanctions.

Russia’s largest lender, Sberbank, has said a digital rouble could push up interest rates.