Digital ruble will affect transmission mechanism of monetary policy - CBR

MOSCOW. Aug 30 (Interfax) - The Central Bank of Russia's (CBR) issue of a digital ruble will affect the transmission mechanism of monetary policy, the CBR said in draft monetary policy guidelines for 2025-2027.

At the stage of the digital ruble's introduction, increased uncertainty regarding client flows and a possible change in the structure of bank balances could have a "scrambling" effect on monetary policy's transmission signal to the economy, the CBR said.

After a period of adaptation, the existence of the digital ruble will probably have a negligible impact that will be protracted in time, the CBR said.

The spread of the digital ruble in the long term will set the stage for increasing the effectiveness of the monetary policy transmission mechanism, the CBR said. The reduction of transaction costs when making payments will increase competition among banks. As a result, interest rates on term deposits and current accounts will respond more quickly to changes in monetary conditions.

Furthermore, the increase in the speed of payments and financial transactions with the digital ruble will help accelerate the transmission of the monetary policy signal, the CBR said.

In addition, the increased accessibility of noncash payments in remote and inaccessible regions will bring financial services to a broader range of economic agents.

The digital ruble is the third form of the Russian national currency that the CBR plans to issue in addition to the existing forms of cash and non-cash money. The CBR has been conducting a pilot project with real digital rubles since August 15, 2023. The first stage of testing is taking place in the friends and family mode with the participation of around 600 individuals from among the employees of 12 banks. They are testing the opening and closing of digital wallets, refilling them and transferring funds between individuals, as well as effecting automatic payments and transfers.

The CBR expects to expand the pilot project on September 1, 2024. A second group of 20 lending institutions will join the testing, with the number of individual participants rising to 9,000 and legal entities increasing to 1,200. QR code payments and payments between legal entities will supplement the list of tested operations.

Implementing the digital ruble into wide circulation is expected to begin gradually in 2025.