“The problem of cross-border settlements is not in the field of technology”

The head of the board of the association Financial Innovations told Kommersant about the potential of using the digital ruble, the costs of its implementation, and the comparison with cryptocurrencies. Roman Prokhorov.

— When the concept of the digital ruble was being developed, the geopolitical and economic situation was very different from the current one. What, in your opinion, has changed in terms of the goals and objectives of the digital ruble?

“Basically nothing has changed. If we return to the basic goals, then I would note the following among them. The first is transaction control. The second is to increase security for users. The third one, which is either forgotten or little highlighted, is the creation of an adequate financial instrument for the digital economy.

In our market, for example, there are already digital financial assets, when some real assets are tokenized, while ordinary fiat money remains on the financial side. Accordingly, at the same time, smart contracts cannot be fully used, more precisely, they can, of course, be used, but the implementation is not seamless. If we have digital financial assets on one side and a digital currency in the form of a digital ruble on the other side, then smart contracts will be able to work in full force here, and their use will form the much-needed synergistic effect of digitalization processes.

– If we return to the first goal – the control one, then here we are talking about creating “colored” money and making sure that they are used in the right way?

– Yes, to control the movement and spending of funds. If we talk about individuals, then this is, for example, control over the fact that subsidies are spent in a strictly targeted manner. With regard to legal entities, it will be useful to trace how and on what the companies that won the tender under the state contract spend the received payment.

— The introduction of the digital ruble requires large resources from both the state and banks. How timely is this in the current situation?

“Innovation is never cheap. But there are two ways: either we stop developing everything and return to horses, carts and plows, or we still try to move forward, no matter how difficult it may be, in the direction of progress. And if we recognize the digitalization of the economy as progress, then in order to support it on the side of money, we have no other option than launching a digital ruble.

How much is it and who will pay?

“In the end, it is always the consumer who pays for us – the chain can be arbitrarily long, but the taxpayer always acts as its final or initial link. If we compare the costs of the digital ruble with some other projects, for example, with the fast payment system (FPS), it was also not easy to implement, there were active opponents, and now everyone liked everything, the project is developing further. As for expenses, the Central Bank will bear them for the core of the digital ruble, and the interface will fall on the banks, everything is very similar to the SBP.

— The digital ruble is a technology based on the blockchain. How resource-intensive is this project in terms of computer hardware and software?

“I would not confuse the kind of blockchain that underpins cryptocurrencies like bitcoin with the one that is required for a central bank digital currency. These tools, despite the external similarity, perform fundamentally different tasks.

In the case of bitcoin, the task was to build a system that would ensure user confidence in the algorithm, but for the digital ruble there is no such task, since the issue of trust in the issuer of the national currency is not in the field of technology.

Accordingly, when creating a digital ruble, it is not necessary to assign additional functions to the algorithm, it is not necessary to duplicate all transactions to all nodes, everything that is done in bitcoin, in order to ensure the stability of the system.

“Nevertheless, the blockchain involves storing a large amount of information, which will increase with each operation. And if, for example, social payments are switched to a digital ruble, these will be trillions of rubles, which will be split into small amounts, each of which has its own path and must be preserved. How difficult is it, what resources will it require?

– At the first stage, this should definitely not cause any problems, because if we look at the operations of individuals, then the non-cash form already accounts for about 80% of payments. At the first stage, about 1-3% of them will go into the digital ruble, well, 5% maximum. First, they will run on volunteers, then they will gradually begin to transfer some budget payments.

I don’t know if the Chinese experience of helicopter money will be used to popularize it, when wallets with digital yuan are raffled among citizens as part of a pilot project, which the winner then spends at his discretion. The Chinese colleagues on the pilot want to test the technology and, like us, to understand whether the story with the amount of stored information is as scary as it seems.

— Can the digital ruble help in solving the problem of cross-border payments?

– The problem of cross-border settlements today, fortunately or unfortunately, does not lie in the field of technology. First of all, it is about trust and that the counterparty countries have their own national interests, while foreign partners have corporate interests. Based on these interests, countries and companies weigh the risks of interacting with us, taking into account the possible falling under secondary sanctions.

Technology won’t solve it. Nevertheless, the use of digital currencies of central banks in cross-border settlements has great potential in terms of increasing the speed of settlements and reducing their cost.

– How much safer will the digital ruble be than the non-cash one, unless, of course, we take social engineering into account, or can it also help here?

– Unlike cash and even non-cash money, the path of each digital ruble can be traced. Accordingly, its misuse can be quite simply identified and stopped.

When making illegal transactions with non-cash funds, the transfer of money, as a rule, is carried out between several credit institutions. That is, the money after the theft is specially driven through one or two or three credit organizations, then credited to the cards of dummy recipients for cashing out. The use of such schemes makes it difficult to promptly prevent illegal transactions. In the case of the digital ruble, all transactions take place in one database, and anti-fraud mechanisms will be able to work immediately at the level of the Central Bank.

— Do all banks need to work with digital rubles? Will this give some advantage to small market participants, or vice versa?

— The fate of small credit institutions in Russia seems to me, unfortunately, very vague, because the level of nationalization of the economy and the banking sector in the current conditions is only growing. And finding a client base and some kind of niche for economic activity for small organizations is becoming more and more difficult.

For some of them, the digital ruble may become the very lifeline that will allow them to find this niche, since, for example, the task of adapting retail chains to accept the digital ruble will arise, and a small but technological bank may well turn out to be a more convenient partner for trade enterprises .

After all, it is more interesting for large banks to work with large networks, and a small bank just has the opportunity to work with those clients who do not fall into the priority focus of a large bank.

Interviewed by Maxim Builov