"On October 13, 2020, the Central Bank of the Russian Federation issued the Digital Ruble document with the title Report for Public Consultations".
The document does not yet contain clear parameters of the project, but there is (pp. 43-44) a list of issues for discussion.
Everyone is invited to send their answers to the questions posed, as well as other proposals on the project to the Bank of Russia by the end of the year.
Questions on the topic "Digital Currency of the Central Bank" (DCCB) are not easy even for professionals. The Bank of Russia is far from the first Central Bank to announce the creation of the Central Bank of Russia. Many central banks announced the creation of a new currency earlier, and it makes sense to familiarize yourself with the state of affairs in this area.
The People's Bank of China (PBOC) was probably the first major central bank to begin practical preparations for the introduction of a digital currency, but it operated in secrecy. The cards were revealed only last year. Among the "pioneers" are also the central banks of Sweden and South Korea. By mid-2020, according to the Bank for International Settlements (BIS), at least six central banks were doing practical work to create digital currencies. And dozens of central banks have already made statements about their interest in the Central Bank.
Since 2018, the BIS began to monitor the activities of central banks in the field of national digital currencies. In August 2020, data from a BIS survey covering central banks of countries that account for 90% of global GDP were released. At the beginning of 2020, 4/5 of the Central Bank surveyed were immersed in the topic of national digital currencies. The survey also included the Bank of Russia, which is marked as the Central Bank, “studying the issue”.
Central banks of developing countries show particular interest in the Central Bank of Central Banks. A number of countries on the periphery of world capitalism are used as testing grounds for developed countries to test systems for creating and circulating digital currencies. So, according to the BIS, in Ecuador, back in 2014, a national digital currency was introduced, but the attempt was unsuccessful. The population preferred to use the American dollar (both cash and non-cash). Three years later, the project in Ecuador was closed.
Another attempt to create a digital currency was made in 2018 in Venezuela - El Petro. This project also failed.
In the group of developed countries, the central banks of Sweden, England and Japan showed interest in the Central Bank of Central Banks. But the US Federal Reserve and the European Central Bank (ECB), which are the issuers of the world's major currencies, have not shown much interest in creating their digital currency until recently. Only in January 2020, the Federal Reserve, and in September and the ECB, also announced that they were starting to create their digital currencies.
For a long time, the leadership of the US Federal Reserve was skeptical about the idea of a digital dollar and almost overslept the emergence of a very strong competitor in the person of the IT corporation Facebook, which was preparing to launch its digital currency libra. It could become a cryptocurrency that could replace the US dollar and remain out of the reach of the Fed as a financial regulator. Moreover: it could immediately become the world currency, serving users of the social network Facebook , and such a quarter of the world's population. It took an incredibly great effort on the part of the Fed and the US government to keep the genie called libra out of the bottle called Facebook (it had to involve Europeans who banned the release of this cryptocurrency in the Old World). If the genie jumped out of the bottle, the Facebook corporation could claim the status of the world Central Bank.
Another reason that prompted the Fed to change its stance on the digital currency issue was the NBK's disclosure of its cards on the digital yuan last year. The NBK announced in December 2019 that the Chinese Central Bank will begin testing the national digital currency in four regions of China next year, like a bolt from the blue for the US Federal Reserve. The final phase of testing the digital yuan will be the Winter Olympics in China in February 2022. Numerous foreign guests who attend the games will be offered digital RMB e-wallets. The NBK made it clear that the digital yuan will be not only the national, but also the international currency. Moreover, one that will have an advantage over the current leading currencies (US dollar, euro, pound sterling, yen, Swiss franc, etc.). The advantage will be that cross-border payments using the digital yuan can be made bypassing the SWIFT system, which is effectively controlled by Washington.
Of the variety of issues related to the structure of the Central Bank System, one of the most pressing is the question of how the national digital currency will relate to the currently existing types of money - cash and non-cash. Leaders and officials of central banks often say that this will be the third type of money, different from cash and non-cash. Some focus on the fact that this is an intermediate form that has signs of both cash and non-cash.
The Central Bank of Russia undoubtedly reduces and even makes impossible the confidentiality of monetary transactions. In addition, the DCCB will become an effective means of ultimately driving cash out of the world of money. Central bank officials usually deny this, but in China, the monetary authorities do not hide that the digital yuan is intended to finally displace cash. The overwhelming majority of Chinese do not see anything wrong with this and even welcome such a replacement. We can also mention the Central Bank of Sweden, which promises that this country will be the first in the world where cash will disappear completely and completely.
Another burning question regarding the Central Bank is: what will be the role of the current commercial banks in the digital currency system? At first, most commercial banks supported the idea of an official digital currency, seeing it as a substitute for cash. Today, when central banks have lowered the key rate to almost zero, and in some places to zero and below, interest rates on deposits in commercial banks have dropped and ceased to generate income for clients (individuals). Clients began to leave the banks for cash. The introduction of the Central Bank of the Russian Federation may further aggravate the position of commercial banks and even lead to their complete disappearance.
Initially, central banks considered two options for digital money: 1) retail currencies; 2) wholesale currencies.
The first option provides that the Central Bank works directly with individuals and legal entities, opening accounts with digital currency for them. In this case, the need for commercial banks as intermediaries between the Central Bank and end customers (individuals and legal entities) disappears. The central bank takes over the functions that were traditionally performed by commercial banks.
The second option assumes that the Central Bank continues to work with commercial banks and that it opens accounts in digital currencies only for banks. And banks act as financial intermediaries between the Central Bank and end customers. Commercial banks are converting wholesale digital currency to retail. There may also be options. Option of transforming digital currency from wholesale to retail without increasing the mass of the second. Or an option with an increase in the mass of digital currency using the usual money multiplier. Then, however, it would be incorrect to call the retail digital currency the currency of the Central Bank, it will be the currency of a commercial bank.
According to the BIS, which conducts surveys of central banks, the wholesale digital currency option is not supported by the Central Bank. Everyone calls the retail digital currency option the preferred option. And this is like a bolt from the blue for commercial banks. It turns out that there is no place for them in the system of the Central Bank of Securities, everything is taken over by the Central Bank. However, the complete destruction of commercial banks is probably not expected. Most likely, they will be re-profiled into branches and offices of the Central Bank, which will be entrusted with the function of tracking and controlling transactions with digital currency of individuals and legal entities on the ground. There will be no digital currency accounts in such branches and offices. There will also be no opportunity to create “money out of thin air” (using the money multiplier). Interest income from such commercial banks will disappear, they will work for a fee that has some signs of a bank commission. With this in mind, many commercial banks have become serious opponents of the idea of the Central Bank.
The most energetic support for the idea of the Central Security Center is the party-state leadership of the PRC. Back in the 2000s, Chinese leaders set the task of internationalizing the yuan, but things stalled. The yuan's position outside of China as a currency for payments and settlements, investment and reserve currency remains very modest. Beijing expects that if it manages to create a digital currency earlier than the United States and Europe, it will be able to oust the dollar and euro from the world monetary and financial markets with a new yuan. Such a yuan, according to Beijing, would be immune to Washington's sanctions.
There are also strong proponents of the digital dollar in the US. For obvious reasons, these are not Wall Street banks. These are the IT corporations of Silicon Valley ("Silicon Mafia"), behind which is the "deep state". The same corporation Facebook , which almost launched its own digital currency on a global scale. These giants have joined the development of the digital dollar and expect to be informal and central to the project. Or maybe the owners of the digital dollar.
It seems to me that the plans of the Silicon Mafia have a much more distant horizon than the plans announced by the FR of creating a digital dollar. For IT giants, the digital dollar is just an intermediate phase. Over time, the dollar in the digital currency project may disappear and only one digit will remain. Capitalism based on money capital will be replaced by the post-capitalism of the digital concentration camp".
The publication in the original source, on the site of the "Fund for Strategic Culture", can be found here.
Valentin Katasonov also read the full version of his article, without cuts, on the Pereprava TV YouTube channel.