CryptoRuble: Definintion, How It Works, History, and Goals

What Is CryptoRuble?

The CryptoRuble is a digital currency currently in development, commissioned by Russian President Vladimir Putin. It will not be a cryptocurrency in the way that Bitcoin is, as it will be issued by the government with no mining involved.

The value of the CryptoRuble will be identical to the value of a regular ruble. The first pilot group for the testing of the digital ruble was formed in June 2021 and includes 12 banks.

Understanding CryptoRuble

In a private meeting, Vladimir Putin announced in October of 2017 that Russia would be issuing its own state-sponsored cryptocurrency—the CryptoRuble. The CryptoRuble, although not formally launched, began its testing phase in June 2021. The digital ruble will be issued by Russia’s Central Bank as a central bank digital currency (CBDC) and managed by the Russian government.

Twelve Russian banks have been chosen to test out the digital ruble: Ak Bars, Alfa-Bank, Dom.rf Bank, Gazprombank, Promsvyazbank (PSB), Rosbank, Sberbank, SKB-Bank, Bank Soyuz, Tinkoff Bank, Transcapitalbank, and VTB.

In 2022, the bank is expected to allow citizens to test the currency. The idea is that CryptoRuble will help decrease costs within the financial system while boosting competition among banks. It’s worth noting that Russia still doesn’t recognize digital tokens or cryptocurrencies as legal tender but legislation was introduced in Feb. 2022 to change that.

On the downside, the digital currency will be centralized in nature, as it’s issued by the Central Bank. The CryptoRuble is expected to operate like the Russian ruble, just in digital and encrypted form. The CryptoRuble will have the same price the ruble has and will be able to be exchanged with traditional rubles.

Goals of CryptoRuble

It is speculated that one of the main reasons for Putin's interest in blockchain is that transactions are encrypted, and thus easier to discreetly send money without worrying about sanctions placed on the country by the international community. 

This theory gained traction after the Financial Times reported in early 2018 that one of Putin's economic advisors, Sergei Glazyev, said during a government meeting that, "this instrument [CryptoRuble] suits us very well for sensitive activity on behalf of the state. We can settle accounts with our counterparties all over the world with no regard for sanctions." Note that Glazyev himself was placed under sanctions by President Obama, preventing him from trading in or traveling to America in 2014.

Another reason for CryptoRuble is that it could help to stomp out other cryptocurrencies that are beyond government control like Bitcoin and Ether. Russia remains displeased with cryptocurrencies, with Putin himself saying in March 2021 that cryptocurrencies were used mainly for crime purposes. These sentiments continue to reflect in the bills introduced by Russian lawmakers in 2020 and 2021.