Cash is making a comeback: how the Central Bank will introduce the digital ruble amid record demand for cash
In July, the volume of cash in circulation in Russia rose to 643 billion rubles, compared to 450 billion in June. This surge comes at a time when the regulator is preparing the ground for the large-scale introduction of the digital ruble. A paradox? Not at all — these are two parallel processes that will soon intersect.
Why Russians are turning to cash
Analysis reveals two key reasons behind the growing demand for cash. The first is technical: mobile internet outages have made non-cash payments unreliable. When a store terminal loses connection, the buyer physically cannot complete the transaction. This forces people to carry more banknotes than they would like.
The second reason runs deeper and is tied to a tax maneuver. Starting in 2026, acquiring services will be subject to VAT at a rate of 22%, making it more expensive for businesses to accept non-cash payments. Small entrepreneurs, whose margins are already thin, are increasingly preferring to work with cash to save on fees.
There is also a third, less obvious motivation. Some citizens are deliberately distancing themselves from the banking system due to distrust, fueled by lower deposit rates. Some of them convert cash into cryptocurrencies as a hedge against inflation.
The price of cash: hidden costs for everyone
Turning to cash is not a free choice. For businesses, cash collection costs 0.5–2% of turnover, and a sharp rise in the share of cash in revenue automatically triggers banking control mechanisms under Federal Law No. 115-FZ. This leads to account freezes and inspections by the Federal Tax Service. Add to that cash flow gaps, difficulties paying suppliers in other regions, and the human factor — theft, cashier errors, counterfeit bills.
For citizens, the risks are no less serious. Cash can be lost or stolen — it cannot be recovered, unlike a card or digital wallet. Money "under the mattress" earns no income and is eroded by inflation. Large cash purchases raise questions from Rosfinmonitoring, and you will have to prove the legal origin of the funds. Bank cashback and bonuses are only available with non-cash payments.
Digital ruble adoption strategy: carrot and stick
The authorities do not intend to wait for the population to embrace the digital currency on its own. The promotion mechanism is built on two components. The first is coercion: retail businesses will be required by law to accept the digital ruble, starting with large retailers. Budget payments — pensions, benefits, public sector salaries — will be partially moved to the new platform, making transactions fully transparent to the Federal Tax Service.
The second component is economic benefit. The acquiring fee for the digital ruble is legally capped at no more than 0.3%, compared to the 22% VAT on commercial acquiring. For citizens, transfers and payments will remain free and without limits, unlike the Faster Payments System. Smart contracts will add security to real estate and car transactions, eliminating the risk of fraud.
The key question is connectivity. The regulator is actively developing an offline payment mode for the digital ruble that would allow transactions even during internet outages. However, experts are divided in their assessments: some see this as a ready-made solution to the problem, while others doubt that offline technology will work quickly and consider "whitelists" of services the only realistic tool.
My analysis: The rise in cash is not a conscious choice by citizens but a forced reaction to instability. The digital ruble could become a bridge between the need for reliability and the demand for transparency, but only if the offline mode works flawlessly. Otherwise, adoption will drag on, and cash will remain the main competitor to the new currency.