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Digital Ruble and Blockchain May Shake Up Traditional Banking, Says Russian Official

A Russian financial official suggests that the digital ruble and blockchain could diminish the relevance of traditional banks.

Fri, 08 Sep 2023, 04:23 am UTC

Anatoly Aksakov, a key figure in Russia's finance committee, believes that the advent of central bank digital currencies (CBDCs), particularly the digital ruble, could put conventional banks on the road to obsolescence. Aksakov, known for his reservations about Bitcoin, recently stated that the role of traditional financial institutions would diminish as blockchain technology becomes more integrated into monetary systems.

During a media forum known as AIF Media, Aksakov indicated that existing banks will need to evolve and find innovative functions. They could still play a part in the growing landscape of digital financial assets. According to him, the classical functions of banks are expected to evolve or even disappear.

His comments follow Russia's advancements in the implementation of its own digital currency. Testing for the digital ruble kicked off in August 2023, triggering concerns among domestic banks over the currency's wider implications. Aksakov revealed that the Bank of Russia has set a daily limit for digital ruble transactions at 200,000 rubles (about $2,000). One key motivation for this, he explained, is to gradually shift people from relying on traditional banks to a system managed by the central bank.

Russian banking organizations have sought clarification from financial regulators, indicating a growing nervousness within the industry. Just last month, the Association of Russian Banks penned a letter to the Bank of Russia, seeking assurance about compensation for access to the new digital currency system. The association also called for a ban on mandatory digital ruble accounts for citizens.

Olga Skorobogatova, the Bank of Russia's first deputy governor, commented earlier that banks will have to become more competitive by offering enhanced loyalty programs to keep customers engaged. In her view, this competitive dynamic will ultimately benefit consumers by expanding their non-cash payment options.

Russia is not the only country grappling with this impending paradigm shift. Colombia's central bank also advised restrictions on CBDC transactions to maintain the relevance of existing banks as primary storage and transaction service providers.

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