A representative of Russia’s Central Bank recently denounced private stablecoins in favor of a possible digital ruble. He claimed that the former is unsafe because its owners do not control the assets backing their value.
CBDC VS Stablecoins
As reported by local media on Monday, the unnamed representative argued that stablecoins are not in fact “stable” in value.
Stablecoins are cryptocurrencies that attempt to circumvent industry volatility by pegging their value to relatively stable, real-world assets. They typically rely on easy token redeemability for their underlying asset, creating the incentives to form a stable market price.
However, the representative claimed that par stablecoin redemptions are not guaranteed, undermining their stable value.
The central bank’s comments are in response to Russia’s Ministry of Finance, with which it often disagreed surrounding digital assets. Last week, Financial Policy Department Director Ivan Chebeskov showed support for a Russian stablecoin tied to rubles, grain, or gold.
“If a business, company, investor has a need to pay or invest in this way, if they need a new tool, we will always support such initiatives,” he said at the time. “This is the right path towards the development of technology.”
However, the Central Bank-backed the digital ruble as a better alternative to private market stablecoins. In his view, such a technology combines “all the advantages of a digital means of payment and the reliability of a full-fledged currency.”
US central bankers have engaged in similar discussions about the relationship between private stablecoins and a potential CBDC.
Last year, Federal Reserve Chairman Jerome Powell suggested that cryptocurrencies and stablecoins could be rendered obsolete through a digital dollar. However, both he and vice-chair Lael Brainard have changed tune since then, believing CBDCs and stablecoins to be “complementary.”
Russia’s Mixed Response to Crypto
The Russian Central Bank has consistently opposed the operation of cryptocurrencies within the country throughout the year. It floated an outright ban on the entire sector in January and argued last month that its purpose should be reserved for international trade. Citizens, it believes, shouldn’t experiment with them.
However, the outright ban approach was rejected by Russia’s State Duma in March, which instead advocated for a regulatory approach. In June, it even approved of a tax exemption for digital asset issuers.
However, there is a point of agreement between Russia’s President, Finance Ministry, and central bank on crypto: the benefits of mining. The latter supports the industry so long as mined Bitcoin is sold outside of national borders.
“We have certain competitive advantages here, especially in the so-called mining,” said Putin in January. “I mean the surplus of electricity and the well-trained personnel available in the country.”
There’s also talk of Russia potentially being forced to use cryptocurrencies to bypass international sanctions. The US treasury targeted Russian Bitcoin miners with more sanctions in April for fear of this possibility.
A member of Russia’s State Duma proposed the idea of allowing countries to buy their oil using Bitcoin in March.