Anatoly Aksakov, the chairman of Russia’s Financial Market Committee in the State Duma, suggested that the Digital Ruble, a central bank digital currency (CBDC), could potentially render traditional banks redundant, as local media outlet Ria reported on Sept 5.

Aksakov reportedly said at a media forum AIF Media meeting that these traditional financial institutions will eventually “fade away” and find new applications as part of the infrastructure for digital financial assets. He said:

“As for the role of banks, I think that their role will fade in the future with the development of blockchain…Perhaps a bank is not needed as an institution, since the digital ruble will be very much technologized.”

The lawmaker further noted that the Russian apex bank has pegged digital rubles’ daily use to a maximum of 200,000 Rubles. He added:

“One of the reasons is the separation of the banking system from cash, because people from banks will have to move to the Central Bank information system.”

CBDCs and banks

As blockchain gained prominence, numerous traditional financial institutions and central banks across the globe embraced this technology and integrated it into their systems with the development of central bank digital currencies (CBDCs) and other use cases.

However, an IMF report cautioned that while CBDCs hold significant promise, they may bring unintended consequences, especially for monetary policy, if not meticulously designed. The report stated:

“CBDCs can, however, induce changes in the retail, wholesale and cross border payments that have negative spillover effects on monetary policy, through their effects on money velocity, bank deposit disintermediation, volatility of bank reserves, currency substitution, and capital flows. Countries most vulnerable are those with banking systems dominated by small retail deposits and demand deposits, low levels of digital payments and weak macro fundamentals.”