I've been posting about digital currencies and how some countries are planning to implement them lately. It's an interesting topic, there's something new every day, there's a new country joining in as it looks like going digital is inevitable.
Some countries are doing it out of necessity, like Sweden, as cash is less used and there's no reason to keep it in circulation. Other countries have other reasons to do so.
If you look at the global superpowers, the world’s most powerful nations that have the most influence over the world, the US is first, second comes China and then Russia. Out of these three, China is in a better position when it comes to digital currency as they are already working on an experimental plan.
The US is also considering the options, forced by circumstances but it's not going to happen tomorrow, that's certain.
Distribution issues of the $1200 COVID stimulus checks, created new momentum for the digital dollar (and a more efficient financial distribution machine). It is no secret that many are still waiting for their stimulus checks, while $1.4 billion in stimulus was sent to dead people. source
This is just an example, something that happened during the lockdown and showed a new system is needed.
Russia is next in line considering implementing digital currency, the digital ruble but they are undecided yet which one to replace, the non-cash or cash. If you're familiar with life in Russia, you may know that the country is not exactly the land of freedom. It's the largest country in the world and the current leader is an ex KGB officer who's in office since 2012, and has been prime minister previously.
Cryptocurrency has a reputation for being a means of criminal money laundering and negatively impacting the stability of financial systems. According to the central bank, there are reasons for strengthening the control over money transactions and increasing their transparency, and more importantly, there is the impetus to develop an alternative such as the digital ruble. source
Implementing a digital currency system in Russia is obviously not because cash is used less and less, but because they think it's a tool of control, makes transactions traceable.
So let's see what is going to change once the digital ruble is born. It will reduce the cost of payment services. Handling cash has its costs, so that is obvious. Banks will have something to worry about as central bank reducing costs means they need to do the same if they don't want to lose clients. Russia's largest retail bank, Sber has criticized the measure saying the new financial system might cost the country’s banks up to 25 billion rubles (~$34 million). Elvira Nabiullina, Bank of Russia’s chairwoman says otherwise, according to her, there's not cause for concern.
The Bank of Russia would like a centralized model in which the regulator will be the administrator of the system, holding all the wallets and the banks will help onboard users, which is obviously not what banks want. Another concern is regarding costs of implementing the new system, which must be paid by the banks.
Russian central bank is thinking of three options when it comes to technical part. One is a decentralized distributed registries, the second would be a centralized database and third a hybrid, a combination of the first two. Each option has advantages and disadvantages as usual.
One of the reasons why Russia wants the digital Ruble is to eradicate the shadow economy and make money laundering impossible. Digital currency is traceable, so every transaction is visible.
According to Vladislav Martynov, adviser to the Russian Cryptocurrency and Blockchain Association (RAKIB) the decision of the Russian central bank to implement the digital ruble is forced by the trend going on in the world.
This is why I said at the beginning of my post that some countries like Sweden have to switch from cash to digital currency as due to less cash use they don't have a choice, while countries like Russia are not there yet. Banks are not prepared yet and don't want the new digital ruble, they are afraid of losing their position and income, not to mention the huge control the central bank gets this way.
The government sees an opportunity to eradicate money laundering and shadow economy. Russia’s central bank issued a 48-page consultation paper in Russian, there's a summarized version in English as well. The consultation will run until the end of December this year. There's no information about what's going to happen after the consultation date expires but when democracy is just a word, you can never be sure of anything. There's a precedent with the Mir cards, when state owned companies were forced to issue NSPK cards to their employees.
Having a credit or debit card to use and also the option of using cash in the same time means you have a choice. You decide which one is more convenient for you. Many people see the digital currency as the end of freedom, which is fair. Using your cash on whatever you want, food or guilty pleasure without being traced means freedom, paying digitally knowing that every payment is traceable is a totally different thing.
I'd like to see how things are going to work out on this front and what countries will be next to join and how. It's a trend now that can't be stopped I believe. My country is taking into consideration the possibility of implementing the digital currency, also forced by the circumstances as cash is not in its way of disappearance. We are ages away of going cashless.
I was curious to see what's the situation in Russia regarding cryptocurrencies. Looks like cryptocurrency owners will be required to report their crypto transactions, wallet balances as well to the tax authority in case the total transaction amount in one year exceeds 600,000 rubles, which is $7,757. The first reporting deadline is April 30, 2022.
Cryptocurrency exchanges and miners are not in a better position either as they are required to provide information on their cryptocurrency transactions to the Federal Financial Monitoring Service. Failing twice in three years or deliberately providing false information is considered a criminal offense! Ouch!
Posted Using LeoFinance Beta