Russia is taking significant steps towards modernizing its payment infrastructure by introducing the digital ruble, its local central bank digital currency (CBDC). The Bank of Russia is considering 2025 as the target year for the widespread adoption of the digital ruble throughout the country, signaling the central bank's strategic approach to transform the payment landscape in Russia.

Digital Ruble as an Additional Payment Method

Olga Skorobogatova, the first deputy governor of the Bank of Russia, has emphasized that the digital ruble is intended to coexist with existing payment options in Russia. These options include the Faster Payments System, Mir payment cards, QR code/NFC payments, biometrics-based payments, and traditional cash.

Coexistence with Physical Cash

The introduction of the digital ruble has raised questions about the possibility of citizens receiving state payments exclusively through the CBDC, similar to the state-controlled Mir payment system implemented in 2014. The Mir system was established to address concerns about potential sanctions from the US and Europe. However, the Bank of Russia has clarified that the digital ruble is not intended to replace physical cash but will coexist with it.

In contrast, China, seen as a strong ally of Russia, has already initiated payments to civil servants using the digital yuan as a way to promote the adoption of its state-controlled digital currency.

International Partnerships and Geopolitical Considerations

The Bank of Russia has plans to establish agreements with countries such as China, India, and the UAE to connect their payment systems. This would enable Russians to use the digital ruble for overseas transactions. However, the introduction of the digital ruble is unlikely to significantly impact Russia's geopolitical situation. Russian officials have acknowledged that CBDC trials can only be conducted with technologically capable and friendly nations.

Digital Ruble and Biometric Data Clarification

It's important to note that the digital ruble initiative is unrelated to the Russian state's efforts to collect biometric data from its citizens. The Central Bank of Russia initiated CBDC trials in 11 cities across the country approximately a month ago.

In contrast, Russian lawmakers passed a law the previous year allowing banks and state agencies to collect biometric data from their clients, including facial scans and fingerprints. This led to the development of the Unified Biometric System (UBS), which serves as a national digital remote identification platform used by the Kremlin and banks.

Unfortunately, these two separate projects have become intertwined in the eyes of some observers, leading to an increase in digital ruble and biometrics-related scams. Reports have indicated that fraudsters have contacted individuals in various regions, urging them to provide biometric data to convert their cash ruble savings into CBDC tokens.

The introduction of the digital ruble represents a significant step in Russia's efforts to modernize its payment systems. While coexisting with traditional payment methods, it also opens up opportunities for international partnerships and transactions while addressing potential misconceptions related to biometric data collection.