from cash to digital rubles

Epigraph:
“This article is the result of an assessment and collation of technical information available in the media and does not carry any political overtones or views.

As part of the work task, I needed to understand for what purpose the “digital ruble” (hereinafter “digital”) is being introduced, what is the difference between this means of payment and “cashless” and “crypto”, and most importantly, what advantages does this type of payment provide.
Ideally, it was necessary to draw an evolutionary line between different means of payment, as well as to describe the pros and cons of using each of the options.

My opinion does not have the character of the ultimate truth,
However, I hope that the information presented will greatly simplify life and save significant time for someone else in searching for specific data.

I would be grateful for constructive criticism or additions that will help me better understand the issue.”

From July 1, 2025, the Bank of Russia plans to launch widespread use of digital national currency.
By this point 13 largest banks in Russia will have to provide its clients with ready-made infrastructure for transactions with digital rubles.

To better understand the differences, we need to start with “cash”, as one of the most common payment options, especially in the regions of the Russian Federation.

Cash — these are physical banknotes and coins that are commonly used in everyday transactions.
They arose as an organic replacement for barter exchange.
Such money can be made of paper (Russia and other countries), polymers (Asian countries and Canada) or metals (this is where the history of the money supply began).

Cash may have a certain nominal value without being tied to world prices, as was the case, for example, in the USSR.
This is done as a stabilization measure to support the economy in difficult conditions.

Cash issued by state central banks (Central Bank) and are put into circulation through commercial banks.
Such money is legal tender in the respective country or partner countries.

A good example is the US dollar, which is accepted in almost every country.
and the “Zimbabwean dollar”, the exchange of which will definitely be difficult.

Let's try to make a comparative analysis of the pros and cons of using cash.

Pros:

1. Ease of transfer, unlike barter exchange.

2. High liquidity within the country.

3. The ability of the state to influence the exchange rate has a positive effect in conditions of sanctions or external pressure.

Cons:

1. It can be faked.

2. Rapid level of physical wear and tear.

3. Low liquidity outside the country, difficulty of use as an interstate medium of exchange.

4. Susceptibility to inflation.

5. The ability of the state to influence the exchange rate makes it possible to “accelerate inflation,” for example, in the event of errors in assessing the financial capacity of the market.

6. The difficulty of transporting large amounts of money.

7. The difficulty of tracking transactions even taking into account the presence of an individual number on each banknote.

8. “Weak” storage means – they can be stolen at any moment.

9. The difficulty of tracking the misuse of funds when they are allocated by the State.

The logical development of cash became non-cash money, or otherwise “cashless”.
Cashless payment — is a form of payment that does not use cash.
Funds are transferred from one bank account to another or sent to a counterparty without opening an account.

Pros:

1. No wallet or other physical means of storing money is required.
   The card doesn't count because it doesn't take up any space.
   The phone too, since it is always with the user.

2. High liquidity within the country.

3. The population has begun to spend more on purchases, since they no longer see “physical money”.
   This fact is confirmed by Retail.

4. The ability of the state to influence the exchange rate has a positive effect in the context of sanctions.

5. It is impossible to forge, you can only steal the card/account.

6. No physical wear and tear.

7. Possibility of payment via QR/NFC in the store.

8. Liquidity appeared outside the country, and non-cash payments became a means of interstate exchange among individuals and legal entities.

9. High level of traceability of transactions.

10. Non-cash accounts have become an investment vehicle.

11. Possibility of receiving cashback from purchases.

12. Large payment amounts are no longer a problem, you only need to transport the card/smartphone.

Cons:

1. Susceptibility to inflation.

2. Slow transaction speed, bank transfers can take 1-3 days.

3. The ability of the state to influence the exchange rate makes it possible to “accelerate inflation,” for example, in the event of errors in assessing the financial capacity of the market.

4. Centralization of account data within banks, which creates the possibility of data hacking and loss of funds.

5. Delayed monitoring of misuse of funds when they are allocated by the State.

6. The ability to block an account by the owner bank for any reason.

It is obvious that such a convenient means of payment quickly gained popularity among the masses.
However, direct dependence on banks, as well as the ability to track transactions, did not please those who used illegal sources of enrichment.

As an example, Arms dealer won't be able to use non-cash accountsince it will be very quickly identified by transactions in its direction.
This same one the argument became a motivating factor for law-abiding citizens who seek reasonable anonymity.

The result was the emergence of such an interesting means of payment as “crypto”.
Cryptocurrency — is a digital currency that has no physical expression in coins or banknotes.
It's decentralized – there is no single center that stores information about transactions with it.
The use of Blockchain technology allows us to achieve high level resistance to hacking.

“Mining” and “Playing on Courses” actively involved those who wanted to get rich quickly.
It became possible to completely disguise “criminal elements” among the mass of “law-abiding citizens”.

Thus the very fact of the existence of “crypto” created an interesting situation in which on the one hand there is a payment method that is protected from hackingwhich individuals and some legal entities have begun to accept,
and on the other hand – this is the agent is poorly controlled by the official authorities, which allows it to be used, for example, as a means of payment for criminal services.

Here, the example of such a country as technologically advanced China, where “crypto” has still not received legal status, is noteworthy.
However, at the same time, it is actively developing the direction of cashless payments via QR.

It can be argued that “crypto” has become parallel branch development of exchange operations.
Whether it will become the forerunner of a new approach to the use of money masses or whether it is a dead-end branch of development – only time will tell.
Experts' opinions on this topic differ greatly, and each of them is substantiated quite clearly.

Pros of cryptocurrencies:

1. No wallet or other physical means of storing money is required.
   The flash drive doesn't count, it can be miniature.

2. The impossibility of the state influencing the exchange rate guarantees the absence of artificial “inflation acceleration”.

3. It is extremely difficult to steal money without direct access to the crypto wallet, as the data is decentralized.

4. No physical wear and tear.

5. High speed of operations.

6. There is liquidity outside the country, there is the possibility of interstate exchange with a number of countries.

7. Low level of traceability of transactions allows maintaining anonymity of individuals at an acceptable level.

8. A large amount is no longer a problem, you just need access to a crypto wallet.

9. Can act as an investment instrument.

Cons:

1. Susceptible to uncontrolled growth and decline.

2. Possibility of “explosive” devaluation.

3. The inability of the state to influence the rate creates monopolies of cryptocurrency exchanges.

4. Shoppers are spending less because retailers don't accept crypto.

5. Low level of traceability of transactions allows for the anonymity of lawbreakers.

6. Low levels of traceability of transactions increase the share of corruption in the country.

7. Unstable liquidity within the country, not everyone accepts payments in crypto.

8. A floating rate does not guarantee the safety of funds.

9. High difficulty in tracking misappropriation of funds when they are allocated by the State in the form of crypto.

It is likely that, having assessed the advantages of cryptocurrency exchange, the Russian Federation decided to develop a similar, but official mechanism.
The Digital Ruble became just that.

Digital ruble — is a central bank digital currency developed by the Bank of Russia (CBRF). It is the third form of the Russian national currency in addition to the existing ones cash and non-cash forms of money.

The first advantage of “digital” – absence of intermediary banks.
All transactions are carried out directly through the Central Bank, which means that the speed of such transactions will be comparable to the speed of the Fast Payment System (FPS), when crediting occurs in seconds instead of days.

At the same time, you won’t need to pay commissions to intermediary banks, which will definitely be appreciated. users and Retail positively.
This also eliminates dependence on the financial condition of the intermediary bank itself; funds will not be able to “hang”, which means the chance of non-fulfillment of financial obligations will be lower.

One ruble will equivalent alone digital ruble.
This means that the transition to digital means will not change the cost of goods or the purchasing power of users.
“Digit” cannot be “mined” for the same reason.

Moreover, it is expected that the technology will be implemented in such a way that there will be no difficulties with payments in regular stores through the digital ruble.
At the same time, the government does not plan to oblige citizens or companies to use the digital ruble.
Choice between the digital ruble, cash and bank cards will remain voluntary.

Thus it appears second advantage – freedom of conversion and use within the country by individuals and legal entities.

In fairness, I would like to note that the opportunity to increase purchases by at least 1% due to the introduction of the digital ruble is will be received with enthusiasm by Retail.
Sales growth is always welcome, and seamless implementation can help facilitate this.
At the same time, the refusal of such a means of payment, on the contrary, may provoke an outflow a certain number of buyers.

Payment using the digital ruble will be very similar to the online shopping process.
The user will have a special wallet on the device, for example, on a smartphone, where digital rubles will be stored.

It is assumed that in stores or on the Internet you will be able to choose goods or services, make payments using digital rubles from your wallet to the seller's wallet.
Digital ruble differs from non-cash money not only in its virtual form,
but also the opportunity to use it without internet accesswhich is relevant for use in remote regions of the Russian Federation.

Thus third plus – this is a storage method similar to “crypto”, to which the possibility of Off-Line calculations has been added, which is indeed a significant advantage, especially for regions of the Russian Federation with weak cellular communications or shielded premises.
Unfortunately, there are still quite a lot of such places in the Russian Federation.
How the issue of potential data races and synchronization will be resolved is not reported.

Non-cash money requires working with banks and their applications, as well as the presence of card systems (Visa, MasterCard, MIR, etc.).
The digital ruble will be used through official application or platform of the Central Bankaccessible to all citizens and companies.

That is, a process similar to the “cancellation of SIM slavery” is proposed, when users were able to change their mobile operator while keeping their phone number.
Now everyone can have a common operator of banking operations in the form of the Central Bank, and all banks are required to accept its “digital” and convert it in a 1-to-1 format into non-cash or cash format without commissions.

This is where it comes from fourth pluswhich is not so obvious, but will appeal to lovers of anonymity.
If you refuse all cards in favor of the Digital Ruble and write a revocation of permission to process personal data, then your personal data will be available only to the Central Bank and to no one else.
This means that the number of “leaks of your personal data” will be significantly less, but such a transition, of course, will not provide complete anonymity.

Every digital ruble has its own unique code, which allows you to control its movement and even program it to perform certain operations.
In media sources this is called “painting”.

The essence of “coloring” is that funds allocated for specific needs cannot be used in any way other than what the algorithm allows.
How it will work and what criteria it will be based on is unknown.
I assume that they will be guided by the TN VED code or its analogue, since this approach will provide maximum flexibility in the settings for using the “digit”.

Thus fifth advantage – this is the targeted use of funds.
Moreover, “coloring” will probably be possible both at the level of individuals and at the level of companies.
Alcoholic parents will not be able to drink away the maternity capital money
and companies (for example, construction companies) will not be able to buy a Maybach instead of asphalt.

It is worth mentioning here that the idea itself is very good in its essence, but the question arises as to how it will be implemented in practice.
As we know, good ideas often perish at the very moment of implementation.
We have no reason not to trust the developers, so we hope for the best.

It is also noteworthy that only the Central Bank has the right to issue the digital ruble into circulation (to issue), which indicates the presence of state support, guarantees of liquidity within the country and management of the targeted spending of funds.

Information on transactions with the digital ruble will be stored in decentralized registrieswhich will ensure increased security and transparency of operations.
In addition, it will not be possible to open multiple wallets – one person or organization can only have one wallet.
That is, in this matter, the State adopted the experience of the cryptocurrency market and improved it towards the legalization of operations.
This is already sixth advantage.

An interesting feature is that deposits are in digital rubles will not bear interest.
These funds are stored on a specialized platform controlled by the Central Bank of Russia and are subject to protection by the regulator, but are not an investment.

Such an account will not be able to act as a means of generating income and the niche is given entirely to the zone of “non-cash deposits”, i.e. to banks.
In addition, payment from a “digital” account will not bring cashback, because it is associated with a card of a specific bank, which is not used in the payment transaction.

As a result, we get a significant set of advantages of “digital”:

1. No wallet or other physical means of storing money is required.
   The storage medium is the telephone.

2. The ability of the state to influence the exchange rate has a positive effect in the context of sanctions.

3. It is extremely difficult to steal funds without direct access to the smartphone, as the data is decentralized.

4. No physical wear and tear.

5. High speed of operations.

6. There is liquidity within the country, a high level of conversion between means of payment.

7. A high level of transaction security allows for reasonable anonymity of individuals.

8. A large amount of money is no longer a problem, you just need access to a smartphone.

9. Possibility of payment by QR in the store.

10. The population spends more because they do not see “physical money”, as is the case with “cashless payments”.

11. A high level of traceability of transactions allows to destroy the anonymity of lawbreakers.

12. High level of monitoring of misappropriation of funds in alert mode, especially when they are allocated by the State.

13. The ability to store funds safely.

14. No acquiring or commissions for transfers or conversions.

15. Possibility of Off-Line payments.

16. The risk level of “data leaks” is reduced even in comparison with Banks.

Cons:

1. Susceptibility to inflation.

2. The ability of the state to influence the exchange rate makes it possible to “accelerate inflation,” for example, in the event of errors in assessing the financial capacity of the market.

3. Cannot be used as an investment vehicle.

4. Unable to receive cashback.

5. Cannot be used outside the Russian Federation.

6. Increased demand for malware with a backdoor for smartphones.

Thus, if the Digital Ruble project succeeds,
then over time there may be a shift away from paper rubles towards digital ones.
In essence the only thing that prevents “cashless” from displacing “cash” – this is the lack of work in Off-Line mode.

And this is exactly what, judging by the announcement, will be successfully resolved in the Digital Ruble.
In this case, pensioners also do not experience stress, since the product is introduced slowly and on a voluntary basis by users.
I estimate the period of actual implementation at 5-7 years.

At the same time, “digital” and “cashless” do not compete with each other, since all the advantages such as “cashback” and “interest on deposits” remained in the banking sector.

We'll wait until mid-2025 and find out all the details 🙂