Amidst rising interest in Central Bank Digital Currencies, Russia has said that it is going to tax transactions that use its CBDC, the Digital Ruble. Russia is going to join the growing list of countries that are deploying digital tokenized versions of their currencies. The currencies are fully backed by the government and under the regulation of the Central Bank.
The news was announced through a report that focused on the deployment of the Digital Ruble and what it would be used for in the Russian economy. The CBDC will be launched independently of the Russian Faster Payment System (FPS). The FPS is a government-owned project that is designed to offer Russians a more modern and updated means of performing financial transactions without the bottlenecks of interbank transfers.
The Russian Central bank has now announced that it will take a share of every transaction completed on the new platform using the Digital Ruble. According to Kirill Pronin, a director at the Bank of Russia, the CBDC is going to offer a unique reduction of transaction costs. He said that the costs for Digital Rubies transactions will be significantly lower than bank and wire transfers.
The Rise of CBDCs
CBDCs have been touted as a parallel to cryptocurrencies that offer better transactional conditions. CBDCs are directly controlled by the Central Banks of the issuing countries and are not decentralized; the government retains full control at every time.
The Central Bank of Russia had previously announced that it would begin the trial launch of the Digital Rubies in the first quarter of 2022. The apex bank said that the BCDC system would be the third form of currency in the Russian economy and would be used alongside the current fiat systems; cash and cashless. The low cost of transacting CBDCs will be the main advantage that the system will have over the current systems.
Top government figures such as the governor of the Bank of Russia, Elvira Nabiullina, have occasionally spoken against the anonymity of cryptocurrencies and have expressed their desire to see the Russian government adopt CBDCs over cryptos. Nabuillina believes that no government should be thinking about adopting cryptocurrencies. He said that he maintains a “negative stance” against “private” currencies such as Bitcoin and other cryptocurrencies.
Crypto Still “Blooming” in Russia
Despite the government’s anti-crypto stance, the Russian crypto community has found solace in crypto mining and NFTs. The activity of crypto miners in Russia has steadily risen over the last year, prompting the Duma, the Russian Assembly, to move for its regulation. Russian crypto miners are reportedly consuming more energy than in previous years, implying growth in their mining capacities.
NFTs are also making slow progress in Russia. In September, Hermitage Museum, a Russian museum with state backing launched its NFT sale. The sales raised more than $400,000 for the museum.
Although the future of cryptocurrencies in Russia is not defined, we can predict that the government would eventually find the best policy to favor the State.