On Tuesday, Russia’s lower house, the State Duma, passed a law approving the introduction of a central bank digital currency (CBDC), or digital ruble. The country’s upper house still needs to ratify the law, but it represents an important step in its digital currency efforts. The Bank of Russia was scheduled to start a live pilot with 13 financial institutions on April 1, but it was delayed due to a lack of necessary legislation. Trials are now expected to start later this month.

The evolution of the digital ruble

Russia’s central bank began exploring the possibility of issuing a digital currency in 2019, when it first floated the idea of ​​using a gold-backed cryptocurrency for international payments. As time passed, the central bank shifted its focus to CBDC.

However, the gold-backed tokens will also be used for short-term cross-border settlement, as Russia has laws in place for privately issued digital financial assets that were originally not allowed to be used for payments.

As for the CBDC, according to Olga Skorobogatova, First Deputy Governor of the Bank of Russia, the digital ruble has been primarily conceived as a retail tool for domestic payments and transfers. However, the central bank has also expressed interest in its cross-border applications, saying the CBDC could provide a way around SWIFT, the messaging network that banned Russian banks following Putin’s 2022 invasion of Ukraine.

Since then, the country has accelerated its work on digital rubles in order to issue a fully operational CBDC as soon as possible. However, the central bank hit a brick wall in March this year when it had to postpone pilot programs scheduled to start in April due to a delay in the State Duma in passing the enabling legislation.

New CBDC Laws

The CBDC enabling law was changed in May to support its use by non-residents without restrictions. This is in contrast to many other central banks that target local or visiting users.

The legislation was included in a broader package of bills covering the introduction of a “third form of money” in the country, complementing existing physical banknotes and electronic money from commercial banks. The documents expand the central bank’s right “to determine the circle of users of the digital ruble platform, as well as to control the list of transactions on the platform and their limit amounts,” according to Interfax.

The laws still need to be considered by the Federal Council before being fully adopted, but they likely won’t face challenges.