The Central Bank of the Russian Federation, or the Bank of Russia, has issued a new policy brief published on April 18 on the advantages and drawbacks of central bank digital currencies (CBDCs).
Titled “Is there a future for central bank digital currencies”, the Russian central bank puts forth several benefits of having a CBDC. These include it being an asset that is more liquid and lower in risk, and its ability to lower transaction costs within the economy. CBDCs can also rival traditional bank deposits by offering low inflation and moderate interest rates.
Minimizing transaction costs will, however, depend on whether a CBDC can be compatible enough in terms of ease of use compared to traditional means of spending in fiat and credit cards. CBDCs also seem to possess only one flaw, according to the central bank. It registered that such currencies lack anonymity compared to fiat, which could prove a turnoff for some.
“CBDC de facto cannot provide the same level of anonymity that is provided by cash. This is certainly an advantage for regulators but can be considered a disadvantage by users, not only those who are involved in suspicious activities but those who are concerned about privacy,” the bank said in its policy brief.