Moscow Interested in Addressing Benefits of Digital Ruble Financing – Report

The Russian government is reportedly keen on launching digital ruble benefits funds, although experts believe significant adoption challenges may still impede Moscow’s CBDC rollout.

This information was disclosed by the publication Rossiyskaya Gazeta. The report indicated that the nation’s Central Bank, the Federal Treasury, and the Ministry of Finance have been “in discussions” regarding the creation of “social funds utilizing the digital ruble.”

Digital Ruble Benefits – Pilot Launch in August?

This follows reports from Russia that the three entities “successfully” tested the digital ruble in “budgetary operations” behind closed doors “at the end of 2024.”

The Russian Finance Minister Anton Siluanov speaking in 2024. (Source: TASS/VK/Screenshot)

The bank has committed to launching the CBDC sometime this year, despite resistance from the country’s commercial banking sector.

The ministry is believed to be particularly enthusiastic about utilizing the CBDC for welfare payments. The department believes this initiative could help mitigate benefits fraud and enhance efficiency.

However, the media outlet reported that the Central Bank still “views [the coin] primarily as a payment method.”

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Ministry’s Initiative

The Central Bank has stated that peer-to-peer transfers between individuals will be free of commission fees.

Businesses, on the other hand, will incur lower fee rates for CBDC transactions compared to traditional bank transfers.

Nonetheless, Finance Minister Anton Siluanov has remarked that “in the future, the digital ruble may have more significant functions.”

“We’re in constant discussions with the Central Bank regarding the development of the digital ruble. It will be a reliable instrument, especially for cross-border payments. But what’s the state’s interest in the digital ruble? [The answer is] traceability. It is crucial for us to be able to use smart contracts with the digital ruble. That will assist with traceability and [ensuring individuals do not misuse funds]. We’re working on this project with the Central Bank.”

Russian Finance Minister Anton Siluanov

The newspaper cited the Central Bank’s press service as stating that a general rollout would not occur “before the second half of 2025.” The bank mentioned:

“We are currently still in the pilot phase. We have 15 banks collaborating with us, including the largest ones in the country. For now, only a limited number of their clients are permitted to conduct transactions with the digital ruble.”

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Digital RUB ‘Roadmap’ – August 25 a Significant Date?

However, the news agency Interfax reported on February 5 that the government has a “roadmap” for “utilizing the digital ruble in budgetary operations.”

This roadmap reportedly mentions August 25. It allegedly states that this is the date the Central Bank and the Federal Treasury “plan to commence the experimental use of the digital ruble to disburse social benefits.”

The same roadmap reportedly indicates that on the same day, the parties wish to also begin piloting CBDC “expenditures on capital development.”

Interfax’s source also mentioned that “pilots” where the digital RUB is utilized to “pay stipends and fines” are “already in progress.”

Rossiyskaya Gazeta quoted the Central Bank and the Ministry of Finance as declining to confirm or deny the existence of the “roadmap.”

The Russian Federal Treasury building in Moscow, Russia. (Source: @znanierussia/VK/Screenshot)

Coin Utilizes DLT Technology

The Central Bank asserts that the digital ruble employs distributed ledger technology. It also claims that individuals will have the option to choose whether to receive welfare and other payments in CBDC or cash.

Veniamin Kaganov, the CEO of the Association for the Development of Financial Literacy, informed Rossiyskaya Gazeta that “for the budget,” it was “essential that public funds are spent strictly for their intended purposes.” He elaborated:

“For instance, adults shouldn’t use child benefits to purchase alcohol and cigarettes for themselves. With the digital ruble, this will become a reality.”

These remarks resonate with Siluanov’s earlier views. The Finance Minister has urged the Central Bank to color-code or “mark” specific digital ruble tokens to ensure that benefit payments are not “misused.”

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Experts Issue Cautions

Timur Aitov, the Chairman of the Financial Market Security Commission of the Council of the Chamber of Commerce and Industry, indicated that the minister’s plans remain in effect. He stated:

“The Central Bank will certainly be able to track the movement of digital rubles both individually and in groups. Technically, it’s possible to apply a certain group characteristic to them, or, in other words, color them. This will prevent individuals from spending child benefits or other social funds inappropriately.”

However, Aitov cautioned that Moscow may need to learn lessons from the “Soviet era.” He noted that during the USSR, cash “with which one could purchase any goods coexisted with non-cash rubles.”

“People were only permitted to spend non-cash rubles according to their intended purpose. They could only buy a strictly regulated list of goods with them. As a result, non-cash rubles had an unofficial value that was much lower than cash.”

Timur Aitov, Chairman of the Financial Market Security Commission of the Council of the Chamber of Commerce and Industry

Kaganov, meanwhile, asserted that “eliminating cash” is not on Moscow’s “agenda.” He concluded:

“Circumstances may change when the payment infrastructure becomes so advanced that individuals no longer wish to carry wallets filled with paper currency. However, Russia is vast. Not every village has internet access. Not everyone uses a smartphone. Therefore, I don’t believe this is something that will happen soon.”

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