At the end of 2022, two draft laws were introduced to the State Duma of the Russian Federation that could introduce a new concept into the payment system of Russia – the “digital ruble.”

  • Federal Law Draft No. 270838-8 “On Amendments to Certain Legislative Acts of the Russian Federation in Connection with the Introduction of the Digital Ruble”
  • Federal Law Draft No. 270852-8 “On Amendments to the First, Second, and Third Parts of the Civil Code of the Russian Federation” were submitted to the State Duma of the Russian Federation at the end of 2022. These bills may introduce a new concept into the payment system of Russia – the “digital ruble”.

25.07.2023 Laws have been passed and signed by the President. The main amendments will take effect from the 1st of August 2023, while some will come into force during the period from the 1st of January 2025 to the 1st of December 2025. Until the 31st of December 2024, the Central Bank of Russia, in coordination with the Rosfinmonitoring, will determine the circle of users of the digital ruble platform, the list of types of transactions, and their threshold values.

Definition of the digital ruble

At the moment, the adoption of the projects is only at an initial stage of consideration, but the documents provide that the changes should come into force already from April 1, 2023, with the exception of certain provisions.

The specified draft laws do not give an exact interpretation of the concept of the “digital ruble”. However, the speech actually refers to the use of a new digital unit of currency (alongside cash and non-cash money) for settlements within the framework of the general idea of digital rights in Russia. The digital ruble is an additional form of the Russian national currency, which will be issued by the Bank of Russia in digital form [1].

The digital ruble will represent a unique digital code. At the same time, there is a clarification that the digital ruble is not a digital currency and has no relation to cryptocurrencies [2].

Project No. 270838-8 proposes to make changes in various areas where provisions for the use of monetary funds exist, in particular, from April 1, 2023, following laws are planned to be changed:

  • “On the Central Bank of the Russian Federation (Bank of Russia)” dated July 10, 2002 No. 86-FZ;
  • “On banking activities” dated February 3, 1996 No. 17-FZ;
  • “On currency regulation and currency control” dated December 10, 2003 No. 173-FZ;
  • “On personal data” dated July 27, 2006 No. 152-FZ;
  • “On electronic signature” dated April 6, 2011 No. 63-FZ;
  • “On the national payment system” dated June 27, 2011 No. 161-FZ,
  • “On digital financial assets, digital currency and on amendments to certain legislative acts of the Russian Federation” dated July 31, 2020 No. 259-FZ.

From January 1, 2024, the following laws may also be amended:

  • “On Insolvency (Bankruptcy)” dated October 26, 2002 No. 127-FZ [3];
  • “On Executive Proceedings” dated October 2, 2007 No. 229-FZ [4];
  • “On Customs Regulation in the Russian Federation and on Amending Certain Legislative Acts of the Russian Federation” dated August 3, 2018 No. 289-FZ  [5].

Infrastructure

The main provisions reflected in Project No. 270838-8 are as follows:

  1. The Bank of Russia will act as the operator of the digital ruble platform.

This means that the digital ruble will only function under the control of this bank, which will, among other things:

  • organize and ensure the uninterrupted functioning of the digital ruble platform;
  • establish the rules of the digital ruble platform, i.e. adopt regulatory acts containing conditions for access to the platform, requirements for platform participants and users, etc.;
  • determine the maximum values of the amount of transactions with digital rubles and/or the amount of balances of digital rubles on digital accounts (wallets);
  • determine the procedure, list of operations, and deadlines for credit institutions to provide their clients with the opportunity to make operations with digital rubles;
  • determine the rates for services provided within the platform, the sizes of remuneration paid by the operator to the participants of the digital ruble platform;
  • provide access to digital accounts (wallets) to credit institutions and other persons specified in the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)” (Articles 46, 48), and in cases determined by the Bank of Russia, also to legal entities based on a contract;
  • have the right to suspend access to the digital ruble platform, access to digital accounts (wallets) in case of violation of the established rules by platform participants or users, as well as in cases provided for by federal laws. In fact, this may mean that all operations can be suspended or even reset at the request of the relevant government bodies and the Bank of Russia.
  • process personal data on an equal footing with participants in the digital ruble platform;
  • be responsible for the security of digital rubles, the accuracy of accounting for information on operations with digital rubles.
  1. The concept, procedure for organization and ensuring the functioning of a special “digital ruble platform” has been introduced.

The digital ruble platform is an information system through which the digital ruble platform operator (the Central Bank of Russia), participants of the digital ruble platform, and its users interact in order to carry out operations with digital rubles in accordance with the rules of the digital ruble platform.

The system will be state-owned, and all transfers of digital rubles will be made exclusively within this platform.

Currently, the Central Bank is testing a prototype of the digital ruble platform together with 12 banks in the country (Ak Bars, Alfa-Bank, Dom.RF, VTB, Gazprombank, Tinkoff Bank, PSB, Rosbank, Sberbank, SKB-Bank, Soyuz Bank, and TKB). Citizens and legal entities will open their electronic wallets on the platform. Initially, personalized and non-personalized wallets will be available to individuals, and only corporate wallets will be available to legal entities [6].

  1. Participants in the digital ruble platform will include:
  • Operators for transferring funds,
  • Foreign banks that own a digital account (wallet) opened in accordance with the rules of the digital ruble platform for conducting operations with digital rubles, included in the list of digital ruble platform participants and providing users with access to the digital ruble platform and digital accounts (wallets), as well as the ability to conduct operations with digital rubles.

Information about participants in the digital ruble platform will be included in a list posted on the official website of the Bank of Russia. The functions of a digital ruble platform participant may be carried out by the Bank of Russia, the Federal Treasury.

By the end of 2023, the Bank of Russia must determine who is authorized to conduct operations on the platform, which entities will participate in pilot projects. Commercial banks or other specially created Bank of Russia structures will be direct participants in the project.

  1. Users of the digital ruble platform will be individuals, legal entities, individual entrepreneurs, as well as government agencies that meet the requirements set forth in the rules of the digital ruble platform and in cases established by Russian legislation.
  2. There are features established for conducting transfers and collecting funds expressed in digital rubles, taken into account on the debtor’s digital account (wallet), in enforcement proceedings and by customs authorities.
  3. Non-residents will be able to open a digital account (wallet) on the platform.

Non-residents in the territory of the Russian Federation are entitled to open bank accounts (deposits) in foreign currency and Russian currency only in authorized banks, with the exception of opening a digital account (wallet).

Digital accounts (wallets) can be opened for non-residents by the operator of the digital ruble platform. Access to digital accounts (wallets) of non-residents is carried out through participants of the digital ruble platform who are authorized banks. Non-residents will be able to dispose of digital rubles within the digital ruble platform in accordance with the established rules of this platform.

However, it will be impossible to settle with digital rubles outside the Russian Federation until other countries issue their own digital currencies and agree on the possibility of converting the digital ruble.

If any foreign bank becomes an authorized participant in the digital ruble platform of the Bank of Russia, it can be assumed that owners of digital rubles will be able to transfer digital rubles to the corresponding bank outside of Russia, but since conversion into another currency is not provided for, these digital rubles will effectively be impossible to use abroad, and their circulation will be limited only within digital wallets with digital rubles among users of this platform and under the control of the Bank of Russia.

The Bahamas already have their own digital currency. Central banks of Caribbean countries, such as Grenada, St. Kitts and Nevis, Antigua and Barbuda, St. Lucia, and St. Vincent and the Grenadines, launched digital currencies as part of the DCash project in 2021. Regulators in Canada, the Netherlands, Norway, France, Japan, South Korea, China, Indonesia, Ecuador, and Kazakhstan have also reported their interest and plans to issue national digital currencies [7].

  1. The possibility of using an electronic digital signature to access the digital ruble platform and the digital account (wallet) is taken into account. Instead of the last name, first name, and patronymic for individuals, and the name and location for legal entities, a unique user identifier for the digital ruble platform will be assigned for identification purposes.
  2. It is not possible to convert digital rubles into cash.
  3. Special features of digital ruble transfers have been established. In addition to transferring digital rubles, the digital rubles kept in the digital account (wallet) of the owner can be transferred to their open bank account or used to increase the balance of electronic funds at their discretion.

Digital ruble – non-cash currency

In the Civil Code of the Russian Federation according to project N 270852-8 it is planned to:

  1. Include digital rubles as non-cash currency units and the payment system with this unit as a non-cash payment form.
  2. Introduce a special section “5. Bank account” and establish the content of the digital account (wallet) agreement, as well as the procedure and features of its conclusion, rules for maintaining the digital account (wallet), including the features of the nominal digital account (wallet) of a trustee or guardian, public deposit digital account (wallet). The rules of the digital ruble platform will be an integral part of such an agreement.

Credit operations on the digital account (wallet), as well as interest accrual on the balance, are not allowed.

In cases established by law, such an agreement may be terminated by the operator of the digital ruble platform (the Bank of Russia) unilaterally.

  1. Changes will be made to the norms on inheritance, wills: the rights to digital rubles accounted for on a digital account (wallet) may be bequeathed at the discretion of the citizen either in the manner provided for by Articles 1124-1127 of the Civil Code of the Russian Federation, or by means of a testamentary disposition.

Many questions remain unresolved and are expected to be established by the Bank of Russia or developed in the regulatory sphere through the practice of implementing the digital ruble, if it is introduced.

Digital rouble Legal Issues