The Central Bank of Russia has discussed digitalization of non-cash money
The regulator believes that despite streamlining transactions, the new technology possesses multiple vulnerabilities. The Central Bank has published a report on the pros, cons, and prospects of tokenizing non-cash money. According to the authority, this technology can expand the possibilities for financial transactions by offering two ways to account for money in a bank account: traditional and tokenized, where funds become anonymous and are represented as tokens.
Among the advantages of the new technology, there is an emphasis on increased transaction speed, simplification of execution, as well as potential cost reduction, including increased automation. Automation also provides users with greater control over their finances, the ability to program transaction and settlement conditions. At the same time, regular customer service is maintained, and opportunities for improving international transfers are opened.
However, the drawback of tokenization is the high cost of implementing the technology, which can pose problems for small credit organizations when implementing it. In addition, the system becomes more vulnerable to system failures, which can lead to unauthorized access to tokens and the violation of banking and commercial confidentiality. The Central Bank also pointed out the risks of monopolization and imposition of conditions on customers.
In the report, the regulator emphasized the need to change legislation. Legislation should regulate issues such as the introduction of the legal framework for tokenized obligations between the bank and the client, accounting and turnover of such obligations, as well as the regulation of smart contracts as a key technological element.
From an economic perspective, the introduction of a new tool, according to the Central Bank, should not impact inflation. However, if the shortcomings of the non-cash money system become evident, it could undermine customer trust in the entire financial system.