Belarus, a former Soviet republic that has been facing economic and political sanctions from the West, has announced the launch of its own digital currency powered by blockchain technology. The move is seen as an attempt to circumvent the restrictions and boost the country’s trade and integration with its allies.
What is the Digital Belarusian Ruble?
The digital Belarusian ruble (DBR) is a central bank digital currency (CBDC) issued by the National Bank of Belarus (NBB). According to the NBB, the DBR will use distributed ledger technology, also known as blockchain, to provide a high level of security and transparency for its users. The DBR will be classified as a non-cash transaction and will use smart contracts to facilitate settlements and payments.
The NBB has revealed that it will use the Hyperledger Fabric blockchain protocol to build its CBDC. Hyperledger Fabric is an open-source platform that allows for the creation of private and permissioned networks that can support various applications and use cases. The NBB said that it chose Hyperledger Fabric because of its scalability, interoperability, and compliance features.
Why is Belarus Launching a CBDC?
Belarus has been facing economic and political challenges since the disputed presidential election in 2020, which sparked mass protests and civil unrest. The European Union, the United States, and other countries have imposed sanctions on Belarus, accusing it of human rights violations and repression of the opposition. The sanctions have targeted individuals, entities, and sectors of the Belarusian economy, such as banking, oil, and aviation.
The sanctions have also affected the country’s access to the international payment system SWIFT and the US dollar, which are widely used for cross-border trade and transactions. Belarus has been looking for alternative ways to maintain its trade and financial ties with its partners, especially Russia and Kazakhstan, which are part of the Eurasian Economic Union (EAEU).
The NBB said that the launch of the DBR will help expand the possibilities for integrating the national payment system with the systems of partner countries. The bank also said that the DBR will lower the barrier of entry for new market participants and provide several advantages for businesses and commercial banks, such as reducing costs, risks, and intermediaries.
How will the DBR Work?
The NBB has not yet disclosed the details of how the DBR will work, such as its issuance, distribution, and exchange mechanisms. However, the bank has said that it will conduct a pilot project in 2024 to test the functionality and performance of the DBR. The pilot project will involve selected banks, enterprises, and individuals who will be able to use the DBR for various purposes, such as paying taxes, fees, salaries, and invoices.
The NBB has also said that it will cooperate with the central banks of Russia and Kazakhstan to ensure the compatibility and interoperability of their respective CBDCs. The three countries have expressed their interest in creating a common digital space within the EAEU that would allow for the seamless exchange of goods, services, and currencies. The NBB said that the DBR will be a key element of this digital integration.
What are the Challenges and Opportunities for the DBR?
The launch of the DBR is a bold and ambitious move by Belarus, which aims to overcome the challenges posed by the sanctions and leverage the opportunities offered by the blockchain technology. However, the DBR also faces some potential risks and uncertainties, such as:
- The legal and regulatory framework for the DBR, which may require amendments to the existing laws and regulations on money, banking, and finance.
- The technical and operational aspects of the DBR, which may require adequate infrastructure, security, and governance to ensure the reliability and efficiency of the system.
- The public acceptance and adoption of the DBR, which may depend on the awareness, trust, and convenience of the users and stakeholders.
- The international recognition and cooperation of the DBR, which may depend on the compliance with the global standards and norms on CBDCs and the alignment with the interests and policies of other countries and organizations.
The DBR is a pioneering and innovative project that could have significant implications for the future of Belarus and its relations with the world. The DBR could offer a new way of conducting trade and payments, enhancing financial inclusion and sovereignty, and fostering digital transformation and innovation. However, the DBR also entails some challenges and uncertainties that need to be addressed and resolved before it can achieve its full potential and benefits.