Bank of Russia Proceeds With Digital Ruble, Renews Push for Crypto Ban

The Bank of Russia said it started the pilot stage of the digital ruble, its planned central bank digital currency (CBDC). It must become an alternative to cryptocurrencies for Russians, the regulator has said, which should be totally banned.

Three banks are already supporting pilot transactions for their clients using existing mobile bank apps, as well as gateways to exchange rubles from their accounts for the digital version, according to an announcement published on the Bank of Russia website on Tuesday. Nine more banks are upgrading their tech stacks to join the pilot soon, the report said.

At the same time, the central bank reiterated its call for a total ban on cryptocurrencies. According to Forbes, the regulator sent its objections to cryptocurrency regulation to the Ministry of Finance, which had earlier proposed allowing regulated crypto purchases through licensed Russian banks. That approach was later detailed in a road map for cryptocurrency regulation published by the government.

In its letter, the Bank of Russia said that allowing non-qualified investors to trade cryptocurrencies through banks will create "an illusion of government protection" while encouraging people to participate in a "de-facto Ponzi scheme," Forbes wrote. The government won't be able to fully control cryptocurrency transactions, and the crypto industry won't really benefit the Russian economy, the bank said.

The government responded to the bank's January call for a ban by publishing a road map for cryptocurrency regulation in Russia shortly afterward. The Bank of Russia was listed as a participant in discussions, however, recent statements indicate it never really agreed with the idea of legalizing crypto. Earlier this year, President Vladimir Putin called for the central bank and the government to find common ground.

The Bank of Russia plans to push for a bill to amend the 2020 digital assets law that would ban crypto issuance, trading and publishing information about such services, Forbes wrote. Banks and communications providers would have to block transactions to individuals known to be involved with cryptocurrency-related business. Financial organizations also wouldn't be allowed to own cryptocurrencies.

The Ministry of Finance, meantime, is on track to propose a bill on regulating crypto by Feb. 18, TASS news agency reported.

The digital ruble project was first introduced in October 2020, with the Bank of Russia committed to creating a prototype in late 2021 and piloting it in early 2022.