The meaning of the introduction of the digital ruble for Russians is revealed

Among the instructions given by Prime Minister Mikhail Mishustin at the end of the strategic session, tasks related to the digital ruble and digital currency took a special place. The Ministry of Finance was instructed, firstly, to prepare proposals for the use of the digital ruble in the budget process and, secondly, together with the Tax Service, Rosfinmonitoring and the FSB, to develop an agreed position on draft laws regulating the issuance and circulation of digital currency in the Russian Federation, as well as the use it in international settlements. These orders show that the digital ruble is no longer an experiment, but a legal tender, and the state is ready to use digital currencies for international payments.

Why is the digital ruble so important and what makes it a strategic asset? It seems that payments in our country are already quite digital. Mir cards are used everywhere to pay for purchases in stores and on the Internet. The Central Bank’s fast payment system is supported by all banks in the country and is now used not only for money transfers, but also for payments using smartphones. Online banking is used daily by 65 million Russians – the majority of the economically active population of the country. What fundamentally new will the digital ruble bring to our lives?

Would you be surprised if I say that from a household point of view, the use of a digital ruble instead of bank accounts will most likely not change anything in your life? Another application that allows you to pay with a QR code or through the interface of your smartphone, or even another card denominated in digital rubles … All this will work in the current, minimally modernized payment infrastructure. Is it worth all this serious public investment? Why does the country need another financial entity?

The answer – “because it is a new digital form of the national currency” – explains little to the layman. Let’s try to figure this out though.

Until recently, we had two forms of money: cash and non-cash. The cash form – banknotes and coins – is a classical system of economic settlements known since the 6th century BC. Cash is issued and guaranteed by the state, does not depend on banks and any technical means, is anonymous. Although they are not very convenient for the accumulation and settlement of large amounts, many people around the world prefer cash, considering it only “real” money, not trusting the second form of money – non-cash. And they generally have some reason to think so. Because non-cash money is funds in the accounts of credit institutions, banks.

The history of non-cash payments is not as ancient as cash. A non-cash form of money appeared somewhere in the 9th century in medieval Europe – in the form of checks, bills of exchange and postal orders. It was naturally born from the fundamental essence of the banking system, namely, from the fact that the bank, roughly speaking, accepts money on deposit with the obligation to return it with interest, and then issues it on credit under the obligation to receive it back with interest greater than it promises. by deposit. There are several consequences of this type of activity: on the one hand, the money in the economy becomes conditionally twice as much, on the other hand, the cash reserve in the bank rarely exceeds ten percent of total liabilities. How to conduct economic activity in such a situation? The answer is to offset obligations!

Historically, from a technical point of view, the process of offsetting such obligations is very complex, slow, and was carried out by various clearing organizations that collected securities, verified their authenticity, considered for a long time who owed how much to whom, and only then carried out the final offsets. The use of computers and information and communication networks in the twentieth century has significantly accelerated non-cash payments. Today, obligations are not kept on paper, but are contained in electronic databases, couriers no longer carry checks in bags, all data is instantly transmitted over the Web, but until now, the clearing cycle of such universally recognized world payment systems as Visa and MasterCard, is, despite for electronic processing, three days!

The advantages of cashless payments are obvious, we use them every day, but the main disadvantage is crystal clear. Banks in general are risky and, despite oversight and regulatory safeguards, can go bankrupt at any moment, causing you to lose all your funds. In addition, non-cash funds are fundamentally not anonymous, inconvenient for micropayments, opening bank accounts involves certain difficulties that not all people can overcome due to various life circumstances, and even in countries with the most developed financial practices, the proportion of the working-age population without accounts is about 10% , and in Russia – more than 12%.

And now a third form of money is coming to the fore – digital. In the 21st century, it became possible to combine the advantages of cash and non-cash money and significantly reduce their disadvantages. Digital money is similar to non-cash in that it represents entries in some electronic register, but, unlike them, they are not obligations of credit institutions. They, like cash, are issued directly by the central bank of the state, that is, they are essentially coins and banknotes in electronic form. And such a seemingly simple logical transfer of money records from commercial banks to the central one gives a fundamental qualitative effect. The clearing cycle becomes banal, settlements can be carried out instantly, just like with cash: a coin leaves one wallet (electronic only) and ends up in another – everything is simple. This significantly increases the speed of transactions and reduces the cost of settlements. The security of funds is no longer the concern of the bank, it is guaranteed by the state for the entire amount of digital money.

Perhaps the only significant disadvantage of digital money is that it does not earn interest. But this is offset by the fact that on the basis of the national digital money system it is possible to use legal smart contracts, special programs for managing your financial resources – investments in assets, securities, which are also increasingly represented in digital form. The advantages of smart contracts are that they are carried out without commissions and intermediaries in the form of brokers, instantly, as soon as the circumstances prescribed in them arise, and exclude human errors. Using digital money and smart contracts, you will be able to manage your financial resources on your own, without an intermediary bank.

In addition, digital money may have new properties that non-cash and cash did not have. For example, they can have an expiration date: money not spent up to a certain point automatically disappears. Or they may be intended solely for designated use, when, for example, social benefits can only be spent on food, but not on tobacco and alcohol.

The totality of the advantages and new qualities of digital money, their new properties, which allow creating new products and tools in the financial and payment markets, require accelerating the introduction of the digital ruble. Its launch, originally planned for 2024, has been postponed to an earlier date – April 2023. At the first stage of the launch of the digital ruble, work with it will be two-level, and it will be carried out through intermediary banks. The need for the participation of banks is now dictated by the fact that the introduction of the digital ruble obviously damages the national banking system: it will be more difficult for banks to attract deposits from the population. Mediation in the work with the digital ruble at the first stage should somehow compensate the banks for losses. Also, at the first stage, the function of money transfers and payments on the Internet will be available.

The next stage will be the introduction of offline payments, that is, payments without communication with central servers – a complete analogue of cash payments. Unfortunately, the technical details of this solution have not yet been announced. According to the experience of other countries, the introduction of technical solutions of this kind is associated with a number of difficulties, which, most likely, will be aggravated in our country by a shortage of semiconductors and the absence of a national mobile platform. However, these are all solvable problems.

And, finally, the digital ruble should become international. The exchange of the digital ruble for other national digital currencies, by definition, occurs without the participation of international payment systems such as SWIFT and the conversion of the national currency into dollars. Direct transactions between the economies of countries become possible. Given the external circumstances, I think we will see the exchange of “digital ruble – digital yuan” very soon.