Russia’s ‘digital ruble’ goes live on September 1. Here’s what we know.

On September 1, Russians will be able to start paying with digital rubles. That is the day Federal Law No. 248-FZ, passed last year, takes effect. This is a completely new instrument, and it works differently from the cashless payment methods people are used to.

The Central Bank calls it a new — digital — form of Russian currency, added to the two that already exist: cash, in the form of banknotes and coins, and cashless money, in the form of funds in bank accounts. All three forms are equivalent: one cash ruble = one cashless ruble = one digital ruble.

To store these “new” rubles, you will need to open a special account on the Bank of Russia’s platform — a digital wallet. Every transfer and payment will run through that same platform. Russians will access their wallets through the channels they already use: banking apps and online banking. A digital ruble account can also be managed through the services of more than one company — through both Sber and T-Bank at the same time, say. All of the country’s largest banks are ready for the launch.

The new instrument can be used only for payments and transfers. You cannot open a deposit account or take out a loan in digital rubles. If you want to, you can also use them for payments to the state — traffic fines, for example. And by arrangement with your employer or a government agency, you can receive wages or state benefits, such as a pension, in digital rubles.

No. Essentially, it’s an electronic token that the Central Bank will issue, but there’s a fundamental difference from cryptocurrency: Bitcoin, to take the obvious example, has no single issuer that carries state-level obligations for the payment instrument. The digital ruble does have an institution responsible for it: the Bank of Russia.

The new payment method definitely won’t be anonymous either. Information about the transactions in your account will be available to the Central Bank and to Rosfinmonitoring, the agency charged with fighting money laundering and terrorist financing.

Finally, the digital ruble will be tightly pegged to the ruble’s exchange rate and will always be worth exactly as much as a cash or cashless unit of Russian currency. That sets it apart from stablecoins, which only try to hold a stable price tied to a particular asset.

The Central Bank, which is behind the initiative, reasons that Russians should have a way to pay and transfer money that doesn’t depend “on the restrictions banks impose in the form of fees and limits.” All digital ruble transactions will be free for individuals, while businesses will pay a minimal fee (more on that below).

Looking out for Russians isn’t the regulator’s only motive, though. The Bank of Russia gets a transparent system for itself, one in which it can monitor every transaction directly on its own platform, with no banks acting as middlemen.

The Central Bank will pay them for the use of their infrastructure. In the end, though, they will most likely come out behind: introducing the digital ruble means some of the money sitting in “ordinary” accounts will drain into digital wallets.

That risks worsening the shortage of available funds — liquidity — at lending institutions, a shortage already growing rapidly. Sber forecasts that the outflow the digital ruble sets off could reach 4 trillion rubles. Researchers at the Gaidar Institute for Economic Policy have also warned about the negative effect on banks.

The Central Bank, for its part, has maintained that it sees no risk of a critical increase in the liquidity shortage.

In a lot of ways, yes.

We have already mentioned the main problems. The Central Bank will have full control over the issuance and circulation of the digital ruble, which will make it easier to monitor what individuals and businesses earn and spend. The regulator can already trace most transactions with little trouble, but the new instrument will make it even easier to see where and when a person paid for something, or to whom they sent money. With cashless payments, the banks did the watching; with the digital ruble, the state takes that job over entirely.

In theory, a state digital currency could hand the authorities another dangerous lever of control. A special code can be “embedded” in money of this kind, allowing the funds to be spent only for certain purposes. Child benefits, for instance, could be tagged with such a “beacon” and accepted only at particular stores — ones that sell diapers and strollers, but not cigarettes or smartphones. Government contract funding could be “painted” a special color, making it possible years later to trace where the money ended up and uncover corruption.

The technology can also be used to step up repression: it could be used to limit transfers to “foreign agents,” for example, or to cap election candidates’ spending.

Central Bank Deputy Chair Olga Skorobogatova has insisted, however, that the regulator has no plans to build “coloring” technology into the digital ruble. And Alla Bakina, the head of the Central Bank’s national payment system department, said the targeted use of digital rubles would be monitored using the same mechanisms already in place for cashless currency.

If you are a customer of a large Russian bank, an option to open a new account will appear in your app or online banking on September 1.

Here is how it looks at VTB, according to RBC. The bank’s customers will be able to open a digital ruble account in the VTB Online app for Android, version 20.16 and later, under the “All my products and accounts” tab on the home screen. To do it, you have to give consent through Gosuslugi, the state services portal. The account will appear in online banking as an additional product. Other banks are likely to offer something similar.

You can top up your wallet with cashless rubles from a bank account through a mobile app. The exchange is one-to-one.

If you want to “turn” cash into digital rubles, you still have to deposit it into a bank account first. The reverse works the same way. To cash out digital money, you first send it back to an “ordinary” account, and only then withdraw the cash at an ATM or a bank branch.

You will be able to pay for goods and services using the seller’s universal QR code. Transfers of digital rubles between individuals work the familiar way, too — by phone number. There are no limits on transfers.

Dmitry Model, the head of financial literacy at NIFI, the Russian Finance Ministry’s financial research institute, told RBC that digital rubles are well protected on the technical side — criminals will not be able to break into the Central Bank’s system and steal money:

To guard against scammers, treat suspicious calls with caution and, when in doubt, contact your bank directly to verify. In any case, because digital rubles will carry unique codes, it will probably be easier to trace what became of them if they are stolen.