Cash versus the digital ruble: the paradox of Russian monetary circulation
The increase in cash in circulation in July reached 643 billion rubles, while in June this figure stood at 450 billion rubles. This surge comes at a time when the regulator is actively preparing the infrastructure for the introduction of the digital ruble. There is a fundamental contradiction here that requires careful analysis.
Analyzing the current situation, I identify two key reasons for such a significant rise in demand for cash. The first is the increasingly frequent mobile internet outages, which have directly hit the stability of non-cash payments. When a terminal in a store loses connection, the customer physically cannot complete a transaction—and this undermines trust in digital payment tools. The second reason is linked to tax innovations: starting in 2026, acquiring services will be subject to VAT at a rate of 22%, making the acceptance of non-cash payments noticeably more expensive. This is especially sensitive for small businesses, which increasingly prefer to work with cash.
The hidden costs of cash
Many mistakenly believe that cash is a free tool. In reality, for businesses, cash collection costs 0.5–2% of turnover. A sharp increase in the share of cash in revenue automatically triggers banking control mechanisms under Federal Law 115-FZ, which risks account freezes and close scrutiny from the Federal Tax Service. For citizens, the risks are no less serious: lost or stolen banknotes cannot be recovered, and large purchases made with cash raise suspicions in financial monitoring.
It is telling that part of the population is moving not just into cash, but into cryptocurrencies, trying to protect savings from inflation. This is no longer just a technical, but a behavioral reaction to lower deposit rates and general distrust of the banking system.
Strategy for introducing the digital ruble
In my view, the mechanisms for promoting the digital currency will be built on a combination of carrot and stick. On one hand, we can expect mandatory acceptance of the digital ruble by retail outlets—from large retailers to small businesses. Budget payments, pensions, and public sector salaries will also gradually be transferred to the new platform. On the other hand, the regulator is betting on economic attractiveness: the acquiring fee for the digital ruble is fixed at no more than 0.3%, which is incomparable to the current 22% VAT on classic acquiring. For citizens, transfers will be free, and smart contracts could radically improve the security of real estate and car transactions.
The key trump card is the development of an offline payment mode that would allow payments in digital rubles even without mobile connectivity. However, here I am skeptical: full coverage of all socially significant services will require considerable time and resources.
Conclusions
The growth of cash is a forced adaptation to current conditions, not a conscious choice by citizens. The share of cash will only decline through targeted government actions, not naturally. At the same time, the main risk is that the digital ruble may not solve the trust problem, but rather exacerbate it, if its introduction is accompanied by new outages and restrictions. In my understanding, the success of the digital currency will depend not on administrative pressure, but on the regulator's ability to prove its reliability and convenience in real-world conditions.