In February, EU foreign policy chief Kaja Kallas pledged to block the use of Russia’s “digital ruble” for use in international payments. However, there is still nothing to block, as the country’s central bank digital currency (CBDC) is being introduced only selectively as part of a testing phase. In the future, however, the digital ruble could be used as a tool to circumvent sanctions through direct linkages with the digital currencies of other BRICS countries. Within Russia, the project serves multiple purposes, potentially enabling the Central Bank to ban certain types of spending, automatically collect taxes, and block access to the inheritance of “unreliable” people. For commercial banks, the full roll-out of the currency could result in a loss of 4 trillion rubles in liquidity.
The ruble is not the first
In September, Russia’s financial system will enter a new technological era: the country’s largest banks and retailers will be required to ensure acceptance of the digital ruble, which the Bank of Russia is promoting as a tool of “convenience and low cost.”
The idea of a central bank digital currency (CBDC) is not new. Economists were discussing the concept as far back as the 1980s, with Nobel laureate James Tobin proposing a new type of account fully backed by reserves at the central bank in order to protect savings from risks. However, for a long time there was no convenient technical basis with which to implement such ideas. That aspect emerged only after the success of Bitcoin, when officials realized they, too, could use distributed ledger technology (or its centralized imitations) to regain control over money flows that had partially moved into the gray zones of the crypto world. Today, around 100 countries are exploring options for introducing CBDCs.
Options for introducing digital currencies are being explored by nearly 100 countries
The first country to launch its own digital currency into full-scale operation was the Bahamas in 2020, but it is not only tiny island nations that are pursuing such projects. China had been testing similar initiatives as early as 2014, and in 2025 the People’s Bank of China officially announced the launch of Renminbi Digital — the most extensive instrument of financial control in the world.
Russia’s model of a “two-tier retail system,” in which the central bank issues currency and commercial banks act as technical intermediaries, is almost entirely copied from the Chinese one. For Beijing, this project has become an effective means of combatting the monopoly power of private platforms such as Alipay and WeChat, as well as a tool of social engineering. Thanks to the “digital wallet,” the state can see every transaction its citizens make in real time.
The “digital euro” is also being actively discussed, but the project is facing fierce resistance from human rights advocates defending the privacy of citizens and businesses. Meanwhile, the United States is treating the “digital dollar” with extreme caution, as the country’s strong banking lobby understands that the introduction of a CBDC will undermine a business model based on fees and liquidity.
Digital, but not crypto
When the Bank of Russia presented its first concept for the digital ruble in 2021, it looked like a response to the hype surrounding cryptocurrencies. The project description included terms typical of that sphere, such as “distributed ledgers” and “smart contracts.” At the same time, the key feature of cryptocurrencies — decentralization — is absent from the digital ruble.
A classic blockchain is built on the principle of having no central authority, meaning that no one can unilaterally cancel a transaction. The digital ruble platform, by contrast, is a closed ledger with different levels of access rights for different participants. The Bank of Russia is the sole owner of the “master node,” the single operator of the platform that issues money and controls the entire database. Technically, it is a system with cryptographic protection, but with an absolute “right of veto” held by the regulator. If the central bank decides that a transaction was incorrect, it can annul it.
If the central bank decides that a transaction made in digital rubles was incorrect, it can annul it
Under the current system, non-cash money in a bank account represents a claim by a client on a commercial bank, which is supervised by the Bank of Russia. The digital ruble, however, is a direct liability of the central bank, with a mechanism for uniquely identifying each unit (a discrete token with an individual serial number). In this set-up, commercial banks act merely as “access nodes,” responsible only for authentication and transmitting instructions. The central bank uses elements of distributed ledger technology to synchronize data between its internal servers, but crucially, it retains the status of an administrator with full rights.
No panacea for corruption
When it comes to the state budget, the digital ruble is expected to simplify financial management and significantly speed up settlements. “Citizens and businesses will be able to receive assistance from the state faster, which is especially important in emergency situations,” the Bank of Russia wrote in its 2025 project status report.
Still, no one is promising to eliminate corruption. Instead, officials speak only of increasing the transparency of budget transactions, which is supposed to reduce “risks of abuse.” As Bank of Russia Governor Elvira Nabiullina explained in October: “We recently conducted a successful experiment with payments in digital rubles under contracts for capital construction, where control over the targeted use of budget funds is critically important. What is the advantage of the digital ruble platform here? Our technologies make it possible, at the program level, to determine who can be paid and for what — specific contractors, subcontractors, for concrete, for employees’ salaries, and so on. It is also possible to determine at what moment the payment should be made — for example, upon receiving confirmation from the state system that the work has been accepted.”
In other words, if every ruble is “colored,” and if its path is visible to the central bank, it is supposedly impossible to steal it. However, this in itself does not signify the end of corruption, as smart contracts can be used not only for legitimate purposes but also in automating complex schemes to conceal evidence of crimes, experts from the International Monetary Fund warn. A ruble can be “colored” programmatically for the purchase of construction materials, but the same cannot be done with an invoice. Schemes involving inflated estimates, fictitious work completion reports, and the purchase of low-quality materials at premium prices will hardly be affected by the introduction of a digital currency. The central bank will transfer digital rubles to the “cement supplier” once the state customer confirms that the service has been performed, but this does not mean financial authorities have verified whether the materials were actually delivered to the construction site or whether they met the specifications stated in the contract.
Smart contracts can be used not only for legitimate purposes but also in complex schemes to conceal evidence of crimes
If a digital currency is introduced in countries that already have a high level of systemic corruption (like Russia), it may even become a tool of selective prosecution, as noted in a report by the International Coalition Against Illicit Economies (ICAIE). If access to the transaction database is controlled by a narrow group of central bank officials, they may manipulate records or conceal operations, making external auditing even more difficult, ICAIE believes.
In short, the digital ruble is more likely to become an instrument of selective transparency than of actual reform. In authoritarian regimes, the system will see all transfers of the opposition but remain “blind” to dubious transactions made by loyalists. And since the registry is fully controlled by the central bank, the Kremlin will also gain the ability to preemptively block the accounts of those attempting to investigate corruption.
The transition from the theory of financial transparency to the real tracking of violations is possible only under conditions of an independent judiciary and a free civil society. In their absence, digital currencies act only as a more advanced means of state control over the population, ICAIE experts conclude.
No cashback
For users, the transition to the digital ruble will mean losing familiar perks. For example, bank cashback is not a gift to the client, but part of the commission that the store pays for processing a transaction. In the digital ruble system, tariffs for businesses are fixed at 0.3%, several times lower than market rates. In such a model, the intermediary bank simply has no source from which to pay rewards to clients. As a result, the declared convenience and “absolute reliability” of the state wallet come at the cost of consumers’ real income.
In addition, unlike deposits in commercial banks, digital rubles held in accounts at the Bank of Russia will not generate profit for their owners.
Unlike deposits in commercial banks, digital rubles held in accounts at the central bank will not generate profit for their owners
People will also have to give up part of their freedoms. Since January 2026, the digital ruble has been introduced on a pilot basis for a number of social payments, and digitalization allows the state to use technical means to restrict how money is used. For example, there are discussions about blocking people’s ability to place bets with bookmakers or to purchase alcohol. A separate subject of debate is maternity capital, which is sometimes cashed out through complex schemes. The digital ruble will make this impossible, as the system simply will not “recognize” a non-designated merchant code.
Any debt, traffic fine, or tax arrears will be written off from a digital wallet automatically. Mandatory write-offs already exist, but they require time in order to process requests from bailiffs. The platform of the Bank of Russia is always transparent to the state, meaning that in conditions of a budget deficit, calling in debts could become a convenient mechanism for increasing the collection of payments.
Control can even be exerted posthumously. The introduction of a system of “digital testamentary orders” means that the transfer of assets to heirs will now also depend on the regulator’s approval. Blocking inheritance for “unreliable” relatives in this system is possible with a single click, creating additional risks for any Russians who might be at risk for inclusion on the country’s ever-expanding lists of “foreign agents” and “extremists.”
Trillion-ruble losses for banks
For the banking system, the introduction of the digital ruble is a problem far deeper than the loss of marketing tools. Financial institutions anticipate a large-scale withdrawal of liquidity, because when money moves from people’s current accounts into digital wallets on the central bank’s platform, it will leave the balance sheets of commercial banks. The scale of this outflow could amount to trillions of rubles.
“After three years, we will see that around 2–4 trillion rubles will be transferred into the digital ruble. These funds will cease to be available for lending, which will ultimately lead to a liquidity shortage and, as a consequence, higher interest rates,” Anatoly Popov, deputy chairman of the management board of Sberbank, explained all the way back in 2020.
In other words, banks will lose their cheapest source of lending — balances held in people’s accounts. To fill this gap, they will have to borrow at the key rate from the Bank of Russia, driving up the price businesses and households pay to borrow money.
The National Rating Agency has estimated the positive effect of digitalization for the economy by 2031 at 260 billion rubles annually, due to reduced transaction costs. But for bankers, this means a reduction in net interest margins.
In effect, the launch of the digital ruble amounts to a soft nationalization of bank liabilities. Money will cease to operate within the private credit market, transforming commercial banks from full-fledged financial institutions into mere operators of mobile applications.
Technological risks
Behind the promise of instant payments lies the problem of performance “bottlenecks” in the platform. Unlike decentralized systems, the digital ruble is tied to a single validator in the form of the Bank of Russia, which will have to accommodate every purchase made in the country using the new currency.
Given Russia’s current shortage of high-performance chips, building an infrastructure capable of handling such a massive financial flow appears to be a near-impossible task. According to a central bank report, from the start of testing the digital ruble through mid-2025, fewer than 100,000 transactions were conducted, and there are risks that under peak loads the centralized registry will simply freeze. In the conventional banking system, the failure of one player does not paralyze the country. However, a failure of the digital ruble platform would instantly leave all Russians without access to their money.
This reality is all the more important given that the system is likely to become a target for hacker attacks. As experts at Kept (formerly KPMG) explain: “Despite the high security standards of the central bank platform, funds in the form of digital rubles are exposed to the risk of attacks by malicious actors who may gain remote access and carry out operations using social engineering, phishing, and malware. The very introduction of the digital ruble and low awareness of the relevant regulations may trigger a surge in fraudulent activity — offers to exchange funds in bank accounts into digital rubles at a favorable rate, speculation about the need for urgent mandatory conversion of cash, and so on.”
What the digital ruble is really for
From the perspective of the Russian authorities, perhaps the most useful function of the digital currency is its potential use in international settlements. “The Bank of Russia is developing cooperation with foreign financial market regulators. Thus, with a number of friendly countries, possible options for the bilateral integration of national platforms are being discussed,” the central bank writes. Issues related to the use of digital currencies are also being worked out within BRICS organization, and the idea of a “BRICS gateway” — where the digital ruble would be exchanged directly for a digital yuan, bypassing SWIFT — looks like a potentially promising solution for circumventing sanctions.
International transfers using digital currencies can indeed be instantaneous, and they are available around the clock, notes the International Monetary Fund. For legitimate users, this is convenient, and for criminals it also creates an opportunity to quickly move funds out of the jurisdiction of one country into another, bypassing traditional banking checks that usually take several days. If such a system comes into existence, law enforcement agencies will have much less time to freeze suspicious accounts (and countries where standards are the most lax will attract a disproportionate share of criminals to their digital infrastructure).
Without global coordination and unified identification rules, digital currencies may become a tool for the rapid and anonymous cross-border movement of illicit capital, the IMF warns. This fact goes at least some way in explaining why EU foreign policy chief Kaja Kallas proposed that European institutions preemptively block the use of the digital ruble.
