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  • The Russian regulator launched public consultations on the potential creation of digital rubles.
  • The central banks try to steer the industry into the centralized scenario.

The Central Bank of Russia is assessing prospects for issuing a digital ruble, according to the press release published on the regulator’s website.

The central bank will gather opinions from the market participants and the financial experts until December 31, 2020, before making a final decision on the digital ruble’s launch. 

The regulator emphasized that the digital ruble would become the Russian version of the central bank-issued digital currency (CBDC) fully controlled by the authority. It will have all the state money characteristics and circulate along with the fiat and electronic versions of the national currency. 

Not any digital coin is a cryptocurrency

Meanwhile, the local cryptocurrency experts have already noted that the proposed digital ruble was nothing close to cryptocurrency. The central bank will control the digital ruble’s issuance, while all the transactions with the new currency will be registered on the centralized platform controlled by the regulator. 

As the FXStreet previously reported, Russia introduces strict measures to restrict cryptocurrency circulation in the country. People who fail to report on their cryptocurrency proceeds may go to jail for three years, while companies that promote cryptocurrency trading may be banned out of existence.  

Moreover, in accordance with the new legislation, cryptocurrency as a means of payment is outside the law in Russia, meaning that it is illegal to buy and sell goods for digital currencies. However, the proposed digital ruble is not covered by the law as it is supposed to be issued and controlled by the central bank.

Global regulators choose the centralized path to digitalization

Recently, the European Central Bank (ECB) announced that it was working on digital euro with similar characteristics: no decentralization and total control by the central bank. 

The European regulator also emphasized that the proposed digital euro would not qualify as a cryptocurrency as it would be traceable and controlled by the central bank. The ECB wanted to ensure that it would remain a custodian of the euro, whatever the form it takes.

Bank of England and Bank of Canada are also exploring the opportunities of CBDC and express concerns about such cryptocurrencies as Bitcoin. In the latest communique published by the top seven countries’ financial leaders, they do not consider the cryptocurrencies as valid money and ready to embrace crypto, only if they keep it under control.

How will the increased focus on CBDC affect Bitcoin?

This coin has two sides. On the one hand, the creation of CBDC will bring blockchain and cryptocurrency technologies closer to mass adoption and help overcome the barrier that stalls the broader usage of the digital currencies. 

At the end of the day, this development may be beneficial to the industry as more people would become accustomed to the new form of money and eventually get the idea behind Bitcoin. This is why the cryptocurrency market reacts positively to the news about CBDC development and central banks’ desire to get involved in the industry and create their own digital coin. 

On the other hand, the issuance of central bank-controlled digital currencies may lead to increased pressure on Bitcoin and other truly decentralized coins. The digital euro, yuan, or ruble helps governments get better oversight into cash flows and tighter control over people’s lives. 

Many experts are worried that CBDC will increase inequality and give the state too much power to push their agenda and punish dissenting business and individuals by kicking them out of the financial system. In this vein, they might want to eliminate the competition and outlaw the truly decentralized currencies like Bitcoin.

The latest G7 announcement shows that they will oppose Facebook’s Libra until it is regulated adds credibility to this statement, as long as Russia’s attempts to block cryptocurrency payments inside the country.