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Putin signs law on introduction of digital ruble in Russia

Russian citizens will not be forced to use the digital ruble, and use of the CBDC will be a voluntary choice for people to make, the governor of the Bank of Russia said.

Russia is moving forward with its central bank digital currency (CBDC) as President Vladimir Putin signed the digital ruble bill into law on July 24, according to an official government document.

With this approval, the digital ruble law is officially scheduled to take effect from Aug. 1, 2023, with all but one rule ready to be enforced.

Article number three — which includes amendments to several Russian federal laws, including those related to bankruptcy and inheritance — is expected to take effect from August 2024.

The new legislation officially empowers the Russian central bank to launch the first CBDC pilot with real consumers in August. Previously, the government expected to roll out trials in April in collaboration with 13 local banks, including heavyweights like Sberbank.

According to the newly signed law, Russia’s central bank will be the principal operator of the digital ruble infrastructure and will hold responsibility for all the stored assets. The digital ruble is designed to serve as a payment and money transfer method, and does not provide for investment purposes.

The digital ruble is expected to act as the third form of money alongside cash and non-cash rubles. Russian citizens will not be forced to use the CBDC, and the use of the digital ruble will be a voluntary choice left up to individuals to decide, Bank of Russia governor Elvira Nabiullina reportedly declared on July 24. She stated:

“No one is going to force anyone into the digital ruble [...] But we really hope that it will be more convenient and cheaper for both people and businesses, and they will start using it. This is a new opportunity.”

According to Bank of Russia deputy governor Olga Skorobogatova, the government doesn’t expect mass adoption of the digital ruble in Russia before 2025 or even 2027.

Related: Russian CBDC by 2025? What’s happening with the digital ruble

The news comes soon after Russia’s State Duma — the country’s lower house of parliament — passed the digital ruble bill in the third and final reading on July 11. The Federation Council subsequently approved the bill on July 19. According to official records, the digital ruble bill was initially registered in December 2022.

Latest developments in the digital ruble bill. Source: Russia’s legislative activity system

While quickly progressing with CBDC legislation, Russian lawmakers have continued to postpone the introduction of cryptocurrency regulation, following a series of delays in the past.

In May, State Duma official Anatoly Aksakov promised to pass four bills related to crypto mining, taxation and international settlement crypto. However, the bills do not seem to have progressed much since.

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Korean banks to research the stablecoins alternative

Hana Bank plans to conduct research on certificate of deposit tokens, while Woori Bank’s research department has already recently released a report on them.

Several private banks in South Korea are studying the potential of tokenized deposits technology, an alternative both to private stablecoins and central bank digital currencies (CBDCs). 

According to the report from Maeli Business News Korea, Hana Bank and Woori Bank, both private enterprises with headquarters in Seoul, showed interest in so-called “certificate of deposit” tokens (CDs). Essentially CDs are tokenized bank deposits, put on the blockchain. They can replace customary notes and deposits without disrupting the existing banking system. And, of course, CDs require identity verification of the same standards as any traditional bank service.

Hana Bank plans to conduct research on CD tokens, while Woori Bank’s research department has already recently released a report on them.

From the bankers’ perspective, it seems CDs have few disadvantages. As the report specifies, the interest in them stems from the anxiety that stablecoins failures of 2022 raised among the financial regulators. According to anonymous senior bankers, cited by the report:

“CD tokens are perceived as stable from the banks’ perspective since they do not differ significantly from the current system.” 

Another important feature is CDs' potential compatibility with CBDCs. Both above-mentioned banks are participating in the proof of concept test for CBDC by the Bank of Korea. 

Related: South Korean Shinhan Bank completes stablecoin remittance pilot with Asian partners

In July, the Bank of Korea revealed its ongoing preparation for the potential introduction of a CBDC, which included investigating the use of smart contracts, offline payments with near-field communications and cross-border payments.

The pilot program with 14 private banks is already functioning. However, there are still some technical issues — the system, which has been managing to handle 2,000 transactions per second, higher than most domestic payment systems can facilitate, slowed down as it reached capacity. The Bank of Korea is now looking into ways to improve the technical capacities of its project.

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Congressman Warren Davidson calls to ban and criminalize CBDCs

“Money should not be programmable by a central authority,” argues Republican Representative Warren Davidson.

United States Republican Representative Warren Davidson has spoken out against Central Bank Digital Currencies (CBDCs), urging Congress to ban them and criminalize its development.

In a July 23 Twitter post, Congressman Davidson accused the Federal Reserve of “building the financial equivalent of the Death Star," stating that CBDCs corrupts money into a tool for coercion and control, adding: 

“Congress must swiftly ban then criminalize any effort to design, build, develop, test or establish a CBDC.”

Davidson’s comments came in response to a position advertised by San Francisco’s Federal Reserve Bank for a “senior crypto architect” to work on a CBDC project.

Responding to a comment from a Twitter user, Davidson argued that money should be a stable store of value, and should not be programmable by a central authority.

“Sound money should facilitate permission-less peer-to-peer transactions,” he added.

The Federal Reserve has been actively researching the technology for a potential digital dollar but has not made any decisions on whether to issue one. The possibility of a digital version of the U.S. dollar has stirred controversy in the country and is expected to be a key talking point in the upcoming presidential election.

Congressman Davidson is also not alone in his concern over a potential Fed-controlled digital dollar.

On July 14, U.S. presidential candidate and Florida Governor Ron DeSantis said he would “nix any central bank digital currency” if he became president. In May, DeSantis signed a bill restricting the use of CBDCs in the state.

Related: IMF’s CBDC push gets feedback from the crypto community — ‘No one wants this’

Republican Tom Emmer has also been vocal in his warnings over state-controlled digital money. In March, the libertarian think tank said a programmable CBDC would be “easily weaponized” as a spying tool to “choke out politically unpopular activity.”

Emmer introduced the CBDC Anti-Surveillance State Act in February to “halt efforts of unelected bureaucrats in Washington, DC from stripping Americans of their right to financial privacy.” The bill was endorsed by Texas Senator Ted Cruz who introduced his own CBDC blocking bill in March.

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Federal Reserve of San Francisco hiring crypto architect for CBDC project

San Francisco's Federal Reserve Bank is seeking a crypto architect for a central bank digital currency (CBDC).

San Francisco's Federal Reserve Bank is seeking a crypto architect for a central bank digital currency (CBDC) project, reveals an Indeed job posting. According to the role description, the employee will work on CBDC research and development.

The position is full-time and hybrid, with an annual salary starting at $134,900, requiring candidates to have "knowledge of distributed systems implementation, cryptographic protocols such as hashing, public-private keypairs and signing, consensus algorithms, and security."

"Given the dollar’s significant role, the FRS seeks to further understand the cost and benefits of the potential technologies for CBDC and this emerging field," reads the posting. According to the Federal Reserve System Careers page, the position has been open for more than 30 days.

"We are looking for a Lead Application Developer to implement example systems related to a CBDC. You will engage directly with management, other developers on the team, development operations teams, and vendors to ensure the Federal Reserve is well-positioned to design, develop, and implement technology to support a CBDC as may be required by the Board of Governors."

Screenshot: Federal Reserve Bank of San Francisco's job posting. Source: Indeed.

A team of crypto developers has been forming at the San Francisco's Fed at least since February, when it was looking for a software engineer to help develop and implement systems related to a CBDC initiative.

The recruitment efforts contradict the public stance of the Federal Reserve Board of Governors on CBDCs. On July 19, the central bank said on Twitter that it had not yet decided whether to issue a CBDC and “would only proceed with the issuance of a CBDC with an authorizing law.”

The possibility of a digital version of the U.S. dollar has stirred controversy in the country, promising to be a key talking point in the upcoming presidential election. Many opponents of CBDC argue that it threatens citizens' privacy and could lead to governmental control, while supporters see it as a global application of blockchain technology.

In a recent event, presidential candidate and Florida Governor Ron DeSantis vowed to ban CBDCs in the United States if elected president. “If I am the president, on day one, we will nix central bank digital currency. Done. Dead. Not happening in this country,” he said during the Family Leadership Summit in Iowa.

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Nigerian central bank adds NFC upgrade to eNaira for contactless payments

The central bank reportedly emphasized that the addition of NFC technology will play a crucial role in boosting the adoption rates for the CBDC.

Despite the former governor’s ousting nearly two months ago, the Central Bank of Nigeria (CBN) continues to be committed to its central bank digital currency (CBDC) project, showing no indications of abandoning it.

According to a report by local news outlet The Sun, the central bank recently enhanced the CBDC mobile app by incorporating Near Field Communication (NFC) technology. This upgrade enables mobile devices and payment terminals to interact when in close proximity, facilitating convenient and contactless eNaira payments.

Despite previous versions incorporating QR codes, the CBN reportedly emphasizes that the latest addition of NFC technology will play a crucial role in boosting the adoption rates for the CBDC. Joseph Angaye, the deputy director of the CBN’s risk management department, reportedly revealed that the banking regulator is committed to utilizing innovative technology to enhance user experience.

Image of the Central Bank of Nigeria’s building. Source: Daily Post

Embracing the idea of utilizing cutting-edge technology, Angaye reportedly revealed that the CBDC would be equipped with programmability features. He explained that these programmability features could limit CBDC payments exclusively to designated government programs, reducing the risk of fraud.

In further explanation, Angaye reportedly emphasized that the CBDC's programmability allows for targeted fund allocation to farmers, enabling specific purposes such as tool acquisition. By implementing this approach, the funds transferred into their eNaira wallet become non-divertible for any unrelated purposes, ensuring that the intended use is strictly adhered to.

As per reports, the deputy director highlighted numerous advantages of CBDCs for retail users in the country, such as mitigating settlement risks and enabling rapid transaction processing. Angaye emphasized that the eNaira aims to address the issue of financial inclusion and Nigeria's pioneering role in adopting CBDCs provides valuable insights for various economic players and entities to learn from the country's experience.

Related: Nigerian social payments app shuts down crypto exchange services

Nigeria launched its eNaira in 2021 to be part of an exclusive group of countries with a CBDC offering. However, adoption rates have fallen below expectations, prompting the central bank to explore several options to drive usage.

The central bank rolled out use cases in the transport sectors while including USSD functionality in the offering. With adoption rates still low, former CBN Governor Godwin Emefiele blamed commercial banks for stifling eNaira’s growth in favor of their profitability.

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Digital yuan integration introduced to Chinese business air travel

The Civil Aviation Administration and China Merchants Bank said passengers will be able to utilize the digital currency to access new services via this platform.

As the pilot program for China's central bank digital currency (CBDC), the digital yuan, takes off, Chinese business travelers will reportedly be able to pay for flight tickets using the new currency. 

A collaboration between China Merchants Bank, a commercial banking firm and the Civil Aviation Administration led to the introduction of an e-CNY platform, aiming to facilitate transactions for travelers in the aviation network, the China civil aviation news agency said in a report.

According to the agency, the newly introduced platform enables companies and entrepreneurs to utilize the digital yuan for convenient payment of business air tickets. Additionally, passengers will have the opportunity to utilize the digital currency to access new services via this platform.

China Travel Service, a travel firm based in Suzhou, has already made use of the platform to purchase tickets on behalf of its clients, the report said.

At the inauguration event marking the platform's official launch, on July 18, both the Civil Aviation Administration and China Merchants Bank called for more use cases for the digital yuan and said they would collaborate in exploring the digital yuan's application in diverse areas of the civil aviation industry.

According to the report, the People's Bank of China (PBoC), the central bank, has been actively encouraging the use of the digital yuan in China's transportation network. Notably, Beijing Daxing International Airport and Beijing Capital International Airport announced their partnership for a cargo-related digital yuan initiative in 2022.

Related: China’s digital yuan nears $250B transaction volume — Central bank governor

Likewise, in line with the digital yuan's integration efforts, railway networks, light rail connections and metro systems in the pilot zone have been upgraded to facilitate seamless digital yuan payments, independent of power or network connections. Furthermore, bus routes within the zone now also accommodate digital yuan payments from passengers. Also, earlier this year, several highway toll booths within the pilot zone started accepting the digital yuan as a payment method.

Remarkably, the city of Shenzhen disclosed that nearly 36 million digital yuan wallets have been opened by its residents and more than seven million new wallets have been created since the start of this year. This ongoing growth of the CBDC pilot program across diverse sectors reflects China's determination to transform its economy by fostering widespread adoption of the digital yuan.

Magazine: China expands CBDC’s tentacles, Malaysia is HK’s new crypto rival: Asia Express

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Will CBDCs Replace Crypto? Bittrex CEO Says Government Agenda a Solution in Search of a Problem

Will CBDCs Replace Crypto? Bittrex CEO Says Government Agenda a Solution in Search of a Problem

Bittrex Global CEO Oliver Finch has some doubts regarding the legitimacy of central bank digital currencies (CBDCs). Finch says in a new Kitco News interview that CBDCs are a “solution in search of a problem.” According to the Bittrex Global CEO, the centralized nature of CBDCs makes them inherently different from Bitcoin (BTC) and other […]

The post Will CBDCs Replace Crypto? Bittrex CEO Says Government Agenda a Solution in Search of a Problem appeared first on The Daily Hodl.

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South Korean central bank charts out future course of payment systems, CBDC

The BOK 2022 Payment and Settlement Systems Report is a forward-looking document with ambitious plans for financial technology in the country.

The South Korean central bank (BOK) has published its 2022 Payment and Settlement Systems Report. Oversight of the systems was carried out successfully, the report said, and it is getting ready for a future with central bank digital currency (CBDC) and is discussing stablecoin regulation broadly.

The BOK-Wire+ fast payment system will be upgraded to real-time gross settlement (RTGS) and has adopted the ISO 20022 standard, which is expected to be implemented in 2028, the report said. The bank will also increase oversight of “Big Tech” payment services and build up its capabilities to respond to “IT operational risk.”

The BOK continued its preparations for the potential introduction of a CBDC, which included investigating the use of smart contracts, offline payments with near-field communications and cross-border payments. The bank connected 14 banks and the Korea Financial Telecommunications and Clearings Institute (KFTCI) with its simulated CBDC system for the second half of the year to verify its functioning.

The system handled 2,000 transactions per second. That figure is higher than most domestic payment systems, the report noted, but it slowed down as it reached capacity, so further improvements are needed.

The bank tried using a zero-knowledge proof protocol to clear CBDC transactions to improve their privacy. That allowed it to hide the wallet addresses and payment amount of the transaction, but it slowed the processing speed markedly and the security implications of a zkCBDC have not been investigated. It said it may consider homomorphic encryption as well.

Related: CBDCs should protect privacy, not be a surveillance tool: Former CFTC chair

The BOK will step up CBDC research, with plans to look at CBDC-based tokenized deposits and expanding the scope of the research with the banks and KFTCI. It said:

“A key focus of the BOK’s research will be identifying a CBDC operating model with minimally adverse impacts on the stability of the financial system and on the effectiveness of monetary policy.”

The report noted “concrete” progress toward crypto asset regulation in the country with the introduction of the Framework Act on Digital Assets Act, but the regulatory framework is still too incomplete for it to allow payments in cryptocurrencies. The bank is also engaged in discussions about stablecoin, it stated repeatedly.

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Russian CBDC by 2025? What’s happening with the digital ruble

2025–2027 might still seem far away, but the Central Bank of Russia is preparing its CBDC for mass adoption by then.

The Central Bank of the Russian Federation’s (CBR) central bank digital currency (CBDC) project has been developing rapidly. The first news about the initiative appeared in 2020, and a regulatory bill was introduced in 2022, which has now passed through its final reading in the parliament’s lower chamber, the Duma.

However, the final rollout of the “digital ruble” among the general public will not happen until 2025–2027, as CBR First Deputy Governor Olga Skorobogatova recently revealed.

The timeline still looks optimistic in the global context. According to a recent PwC report, only about 24 CBDCs may be live by 2030. But for a country actively seeking ways to trade internationally under heavy financial sanctions, such timing may feel relatively slow.

Ups and downs of the digital ruble

In 2017, the CBR announced its interest in exploring the idea of a digital currency. At the time, Skorobogatova emphasized that developing a CBDC was a priority and that the CBR would investigate soon. However, the bank’s governor, Elvira Nabiullina, didn’t consider it a top priority and regarded it as something to be explored in the medium to long term.

In 2022, the CBR revealed it planned to introduce the digital ruble across all banks in the country by 2024. It explained that the implementation would be done in stages and involve extensive testing and infrastructure development. According to the central bank, the digital ruble would coexist with traditional cash and non-cash payment systems, giving consumers more flexibility in their transactions.

CBR governor Elvira Nabiullina in an interview. Source: MarketWatch.

In February 2023, Skorobogatova made a public announcement regarding the first consumer pilot of the digital ruble, scheduled to commence on April 1, 2023. The trial would include the participation of 13 local banks, numerous merchants and real consumers.

That same month, Gazprombank, a banking subsidiary of state-owned energy corporation Gazprom and one of the pilot’s participants, publicly proposed giving banks more time before implementing the CBDC.

Indeed, the bank’s concerns were understandable, as one report from auditing firm McKinsey estimates that Russian banks could lose $3.5 billion in commissions and fees in five years to a CBDC.

The pilot’s launch was eventually delayed along with the passage of the digital ruble bill in the Duma.

The amended bill establishes key legal definitions such as “platform,” “participants” and “users,” while also outlining general guidelines for the CBDC ecosystem.

Under the current framework, the CBR assumes the role of the primary operator for the digital ruble infrastructure and holds the responsibility for safeguarding all the stored assets.

As the primary objective of the CBDC is to serve as a payment and transfer method, users of the digital ruble will not have the option to open savings accounts. Individual customers will enjoy free payments and transfers, while corporate clients will incur a fee of 0.3% of the payment amount.

Waiting for 2025?

On July 6, CBR’s Skorobogatova said every citizen would be able to open the wallet, receive digital rubles and use them “on the horizon of 2025–27.”

Skorobogatova specified that a lot depends on banks and their readiness to adopt the necessary infrastructure, as private banks would facilitate digital ruble transactions within their standard apps, with the whole process of the central bank’s mediation more or less invisible to the final customer. Skorobogatova emphasized, “The digital ruble is not a cryptocurrency or a stablecoin, where there’s often no emitter or you don’t know one.”

Aleksandr Podobnykh, head of the Saint Petersburg branch of the Association of Chief Information Security Officers — a cybersecurity consulting firm involved in CBDC legislation — believes the 2025–2027 deadline is realistic and that test infrastructure is ready to pilot the digital ruble:

“Now about 30 legal entities are involved in testing — these are banks, retail and individual entrepreneurs. Until 2027, up to 1,500 subjects (including individuals) will take part. Upon completion of the testing, recommendations for scaling will be developed.” 

Podobnykh also mentioned the upcoming updates to Federal Law 115, regulating Anti-Money Laundering and Counter-Terrorist Financing procedures. The proposed amendments would take into account new forms of exchange to help financial monitoring agencies analyze CBDC transactions.

Elena Klyuchareva, senior associate at Russian law firm KKMP, also sees no anomalies in the 2025–2027 deadline.

“The delay in digital ruble implementation may be connected mainly to technical aspects,” she told Cointelegraph. “The infrastructure envisaged by the CBR concept is complicated and shall facilitate not only online but also offline transactions and ensure a high level of cybersecurity.” And, Klyuchareva added, such infrastructure will be based mainly on domestic software solutions due to international sanctions:

“According to prior comments of the CBR, they do not want to intentionally speed up the process but wish to ensure that the digital ruble platform functions properly and is safe and secure.”

The decision to postpone the implementation of the Russian digital currency shouldn’t be seen as a failure of the project, but as an attempt to develop a stable, well-balanced solution, Klyuchareva concluded.

Given that only four CBDCs are currently in circulation, Russia will probably be among the first adopters — even if the digital ruble doesn’t launch until 2027.

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CBDCs Will Be Nixed on ‘Day One’ of Ron DeSantis’ First Term, According to Presidential Candidate

CBDCs Will Be Nixed on ‘Day One’ of Ron DeSantis’ First Term, According to Presidential Candidate

Florida Governor Ron DeSantis says that the agenda to bring in a central bank digital currency (CBDC) will be nixed on his first day in office if he is to be elected president. In a discussion with popular news personality Tucker Carlson at the Family Leadership Summit, DeSantis says that he’s expecting the Federal Reserve […]

The post CBDCs Will Be Nixed on ‘Day One’ of Ron DeSantis’ First Term, According to Presidential Candidate appeared first on The Daily Hodl.

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