Digital ruble rise threatens future of Russia's traditional banking sector

Russian MP Anatly Aksakov believes that traditional banks may "disappear".

According to a report by local media Ria on September 5, Anatoly Aksakov, chairman of the Russian State Duma Financial Markets Committee, said that the central bank digital currency (CBDC) digital ruble may make traditional banks redundant. .

Aksakov reportedly said at the media forum AIF Media conference that these traditional financial institutions will eventually “disappear” and look for new applications as part of the digital financial asset infrastructure.

He said: “As for the role of banks, I think their role will gradually disappear in the future as blockchain develops... Maybe banks will no longer need to be an institution because the digital ruble will be highly technical. "

The lawmaker further noted that Russia's top banks have fixed the daily usage limit of the digital ruble at 200,000 rubles.

He added: "One of the reasons is the separation of the banking system from cash, as bankers will have to switch to central bank information systems."

CBDC and Banks

With the rise of blockchain, many traditional financial institutions and central banks around the world have embraced the technology and integrated it into their own systems as central bank digital currencies (CBDC) and other use cases develop.

However, a report from the International Monetary Fund warns that while CBDCs hold great promise, they could have unintended consequences if not carefully designed, particularly for monetary policy.

The report states:

“CBDC can trigger changes in retail, wholesale and cross-border payments, with negative spillover effects on monetary policy through effects on currency velocity, bank deposit disintermediation, bank reserve volatility, currency substitution and capital flows. The most vulnerable countries These are countries with banking systems dominated by small retail and demand deposits, low levels of digital payments, and weak macro fundamentals."