Anatoly Aksakov, head of Russia’s parliamentary financial committee, recently threw a proverbial grenade into the financial world. He asserted that the rise of central bank digital currencies (CBDCs), particularly Russia’s digital ruble, could lead to the extinction of traditional banks.
As Russia continues its trials, the implications of Aksakov’s claims for the global banking system become increasingly crucial to consider.
As Blockchain Integrates, Traditional Bank Roles Will Diminish
Aksakov argued that the role of traditional banks would diminish as blockchain technology becomes more integrated into global financial systems. Consequently, this outlook arrives at a pivotal juncture for Russia, which, as of Aug. 1, enacted a law allowing the Bank of Russia (BoR) to officially initiate trials of its digital ruble.
Unlike conventional currency, the digital ruble operates exclusively as an electronic asset. To manage its impact on the banking system and deter money laundering, the Bank of Russia has imposed a daily usage limit of 200,000 rubles per individual.
Aksakov ardently supports the digital ruble’s potential to disrupt the traditional financial system. However, not everyone in Russia shares his optimistic view. In fact, the public remains skeptical. More often than not, they view CBDCs as potential scams.
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Aksakov admits banks may evolve in the digital ecosystem, but doubts their future role. According to him, the digital ruble, aided by blockchain technology and advanced algorithms, could perform most current functions by banks.
“The robot will make decisions – a person is not needed there. Maybe the bank is not needed as an institution since the digital ruble will be very much technologized,” he argued.
Aksakov supports the digital ruble’s potential to disrupt, yet not everyone in Russia shares his view. The public remains skeptical, often viewing CBDCs as potential scams.
Loyalty Programs May Help Banks Stay Relevant
Furthermore, the Association of Russian Banks has also expressed concerns. Stakeholders are actively pressing the BoR for clarity on the expected rules and compensation structures as digital rubles continue to gain market traction.
Crypto vs. banking: which is the smarter choice?
Deputy Governor Olga Skorobogatova suggests traditional banks stay relevant through innovative loyalty programs.
“We are simultaneously solving two problems: on the one hand, we are building and developing a sovereign payment infrastructure, on the other, we are expanding the choice for citizens and businesses. People should have a choice,” said Skorobogatova.
CBDC scrutiny isn’t confined to Russian borders. Central banks and financial institutions worldwide, including those in countries like Colombia, are grappling with the question of how CBDCs could alter the existing banking paradigm.
Colombia’s central bank, for instance, recommended setting limitations on CBDC holdings and spending to sustain the commercial banks’ relevance in a digital age.
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