Russia begins large-scale introduction of the digital ruble into the budget and banks

Russia has begun introducing the digital ruble in its budget system and banking sector on a larger scale, in preparation for a full-scale launch this September, according to Russian state-owned outlet RIA Novosti.

The Central Bank of the Russian Federation-backed digital currency has reportedly been in active use since the start of the year for state-related transactions. Per the local news publication, the third form of the national currency is now available for transfers to government budgets and payments to federal institutions. 

The state set a phased launch and deadlines for banks and businesses to incorporate the digital ruble in 2023, stating that by September 1, 2026, the country’s largest banks and their institutional retail clients must allow customers to conduct transactions using digital rubles. 

Digital ruble testing begins ahead of banks and retail integration 

According to the law enacted by the Russian Central Bank when the currency was approved two years ago, banks holding a universal license and retail companies with annual revenue exceeding ₽30 million are required to process digital ruble transactions starting on September 1, 2027. 

Smaller banks and retailers with annual revenue below ₽30 million will follow a year later, with compliance mandated from September 1, 2028. Very small retail outlets, like businesses with annual revenue under ₽5 million, are exempt from the requirement to accept payments in the new currency.

The law also set a timeline for introducing a universal QR code, based on a solution developed by the National Payment Card System (NPCS). The single QR code is meant to simplify non-card payments at the checkout and limit the confusion that may be caused by competing QR systems.

All banks must adapt their systems to support the universal QR code by September 1, 2026, though they may choose to implement the change at their discretion before the deadline. 

The Bank of Russia has also decided to set zero fees for transactions from digital ruble accounts belonging to citizens and companies when payments are made for taxes, fees, and government-related payments, which commenced last week. 

Digital ruble to impact Russia’s financial stability, economists say

Natalia Milchakova, a senior analyst at the brokerage Freedom Finance Global, told Russian outlet Deita that the digital ruble is a “serious competitor” to Russian financial payment systems like the MIR card. She said the introduction of the new currency could cause “a slump in the domestic card market by around 7% to 9% per year.”

At the start of 2022, MIR’s share did not exceed 10%. But after Visa and Mastercard left the market, the share surged to around 80%, she noted. Even if foreign card networks return, Milchakova surmised, they are unlikely to walk back into leading positions.

The head of the National Payment Card System, Dmitry Dubynin, mentioned that over the system’s ten-year existence, transaction volumes exceeded 100 trillion rubles, while the number of transactions reached 86 billion. He provided Deita with statistics that showed 475 million cards have been issued in total, with issuance going up by 17% in the past year alone.

In other crypto-related news, Russia’s central bank proposed a framework that would legalize and regulate crypto trading for individuals and institutions by the end of 2025.

“Crypto is not issued or guaranteed by any jurisdiction and is subject to increased volatility and sanctions risks,” the central bank said in a press release. “When deciding to invest in crypto assets, investors should understand that they assume the risk of potential loss of their funds.”

Cryptocurrencies and stablecoins under the new law would be treated as financial instruments and not as currency because they, according to the central bank, cannot be used for domestic payments.”