Digital currencies will help overcome economic difficulties
In recent weeks, attention in the financial market has shifted to the issues of sanctions, the resumption of trading on the Moscow Stock Exchange, and volatility in the commodities market. But one of the newest markets – the digital currency market – in Russia is ready to please supporters with two pleasant news.
The Prime Minister of the Russian Federation Mikhail Mishustin said, as we wrote the other day, about the need to “integrate the mechanism of turnover of digital currencies into the financial system of the country.” Regulation of cryptocurrency mining (mining) issues should also begin. It seems that the months-long dispute between the Ministry of Finance and the Central Bank regarding the prospects of approving or banning the crypt is resolved in favor of the first department.
At the same time, full-scale testing of the digital ruble may begin in Russia. It is stated that by the end of 2022, Russians will be able to use the third form of payment after cash and non-cash payment by plastic cards. CBDC (digital currency of the central bank) will be issued by the Central Bank and stored in its own accounts. And the population will get access to them by giving an order through their bank, for example, through a banking application.
It is stated that now all transactions will be visible to the regulator, which will remove the risk of fraudsters stealing money from your account. Hmm … in theory, this will almost nullify corruption, because all operations will be visible to the competent authorities, and it will be impossible to cover up the traces.
But not everything is as wonderful as it may seem at first glance.
- Not all owners of the crypt are ready to get out of the “gray zone” and start working under the control of the state. And the reason here lies, rather, in a misunderstanding of the mechanisms of the domestic CBDC. How will they differ fundamentally from cashless payments? There are still more questions than answers here.
- It is also not entirely clear what advantages investors and owners of cryptocurrencies will have after informing the regulator about what assets they own. Naturally, you will need to pay taxes, and the “big brother” will constantly monitor the activity on the account. So far we have met few people who are happy to pay taxes to the state.
- One of the original goals of cryptocurrencies when they were created, in addition to anonymizing transactions, was to get rid of intermediaries in the form of banks and reduce commissions. Now all transactions will take place through intermediaries in the form of financial organizations and the Central Bank, which will also have to deduct a commission for the transfer.
Advantages for Russians in case of launching a digital ruble
- A reduction in transaction fees has been announced. Entrepreneurs will not have to pay acquiring fees, and users will not pay for transfers. They also promise that the commission for transactions of the Russian digital ruble will be much less than in the SBP system.
- The high speed of transactions is declared. They also promise that it will be possible to make a payment even without connecting to the network.
- It will be impossible for foreign countries to arrest or freeze the digital ruble if sanctions are imposed on it. Unfortunately, this issue has recently become extremely important for Russia and its economy.
What does this news mean for Russians and domestic companies?
In economically developed countries, the issue of regulation (or a complete ban) of cryptocurrencies and everything related to them is acute. China has chosen to create a digital yuan and prohibit any transactions to citizens and companies with non-state digital currencies. The USA, Europe and, it seems, Russia will follow the path of regulating cryptocurrencies, as well as creating their own CBDC.
Regarding the last process, it is too early to indicate any details, because they are only having a discussion in the legislative bodies. But the option with the desire of the parties to take into account the positive and negative experience of the country that will be the first to launch its digital currency into circulation seems more likely.
Global finance is rapidly transforming, and we can expect further displacement of cash from circulation. The issue of the speed of operations and low commissions for their conduct also remains relevant. Perhaps the emergence of digital state currency systems (and private cryptocurrencies embedded in the state financial system) it can lead to the development of finance and technology.
On the other side of the scale is the unwillingness of the vast majority of entrepreneurs and citizens to work with cryptocurrency and CBDC. They (as well as, perhaps, the authorities) do not fully understand the mechanism of the new products. To change the situation, educational work with citizens on these issues is needed.
Now it remains only to wait for news about the development of the digital currency market; then it will be possible to discuss these initiatives. At the current stage, both advantages and disadvantages can be identified.