Kostin named banks’ main complaint against digital ruble

Andrey Kostin, the head of VTB said he didn’t basically oppose the digital ruble, but at the same time didn’t rule out that if it is introduced, “a part of the business sector may move from banks to the Central Bank”. The issue needs to be negotiated with the regulator, Kostin said.

The introduction of the digital ruble requires further work. It will be discussed with the Bank of Russia, said Andrey Kostin, President and Chairman of the VTB management Board, in an interview with RBC during the forum “RUSSIA CALLING!”. He thinks, there really may be a situation when “a part of the business sector moves from banks to the Central Bank”. However now it is not clear “how commercial banks will be integrated [into the digital ruble system] and how they will be able to maintain their business”. “Doing business is definitely not the Central Bank's job," Kostin highlighted.

Kostin pointed out that he was never against the digital ruble, but opposed unregulated cryptocurrencies. “I said that the existence of a digital currency, which is not regulated in any way and is a private matter for everyone mining it, will eventually come to an end, because the state will never tolerate it developing as a parallel financial system”, the head of VTB explained. As for creating the digital ruble as "some kind of state currency", according to Kostin, it is quite possible.

it is not clear "how commercial banks will be integrated [into the digital ruble system] and how they will be able to maintain business." "Doing business is definitely not the Central Bank's job," Kostin said.

On October 29th, the head of the Central Bank Elvira Nabiullina, speaking at the forum "RUSSIA CALLING!", admitted that the introduction of the digital ruble can affect the business models of banks. “We understand this and we want to hear how banks see it. This can make liquidity management become more complicated, but the Central Bank is ready to adjust its tools so that banks do not have any concerns. The revenue structure will be changed. Costs for individual operations will drop, but its convenience will make the volume of such operations greater”, Nabiullina said. She stressed that the Central Bank wants market participants to be able to offer new services to customers on the basis of the digital ruble.

In October, the Central Bank published a report, which stated that the Central Bank would discuss the possibility of issuing the digital ruble. If the decision is taken, it will become the third form of money in Russia, along with cash and non-cash. It looks like a digital code that should be stored in a special electronic wallet. At the same time, the report mentions that the Central Bank itself will be the issuer of the digital ruble, and that the transfer of digital rubles will be carried out by moving the digital code from one electronic wallet to another. To conduct transactions, the user should be authorized, the data will be registered on the Central Bank platform. The digital ruble can be available “24/7 in the Bank’s application (financial intermediary) that gives the user access to an electronic wallet on the digital ruble platform, as well as in other applications that have a connection to the digital ruble platform”, the report explained.

The authors of the report pointed out that the redistribution of funds between deposits and the digital currency can force commercial banks to raise rates on deposits and loans. “If necessary, a bank can replace the “dropped-out” part of deposits with funds of the Central Bank using its operations to provide liquidity”, the report noted.

According to Nabiullina, the digital ruble may be introduced in the test mode at the end of 2021. However, the final decision whether the issuing of the digital ruble is reasonable or not, has not yet been made.