Cash vs. Digital Ruble: The Paradox of the Russian Market and the Authorities' Strategy
In July, the volume of cash in circulation surged to 643 billion rubles, up from 450 billion in June, and this spike comes amid active preparations for the introduction of the digital ruble. At first glance, the situation looks paradoxical: the country is gearing up for the total digitalization of finance, while citizens and businesses are, on the contrary, increasingly turning to cash. But if you dig deeper, it becomes clear that this is not a contradiction but a natural reaction to the current instability.
Why cash is making a comeback
The Central Bank highlights two key reasons for this trend. First, the increasing frequency of mobile internet outages has made cashless payments unreliable. Imagine standing at the checkout with goods while the terminal loses connection—the transaction becomes impossible. Under such conditions, people are forced to carry more cash than before. Second, upcoming tax changes from 2026, when acquiring services will be subject to VAT at a rate of 22%, make accepting cashless payments more expensive. Small businesses, which already operate on thin margins, are increasingly preferring cash.
However, there is also a deeper reason. Part of the population and entrepreneurs are simply disillusioned with the banking system. Lower deposit rates are pushing people to seek alternatives—and some of these funds are flowing into cryptocurrencies as a hedge against inflation. This is no longer just a technical issue but a matter of trust in financial institutions.
The cost of cash circulation
Turning to cash is an expensive pleasure for both sides. Businesses bear the costs of cash collection: storage, counting, and secure transportation of paper money cost from 0.5% to 2% of turnover. A sharp increase in the share of cash in revenue automatically triggers banking control mechanisms under Federal Law 115-FZ, leading to account freezes and inspections by the Federal Tax Service. The risks for citizens are no less serious: cash can be lost or stolen, and unlike a card or digital wallet, it cannot be recovered. Money "under the mattress" earns no income and depreciates due to inflation. Moreover, large purchases made in cash raise suspicions with Rosfinmonitoring, and you would have to prove the legal origin of the funds.
How the digital ruble will be introduced
The authorities' strategy, it seems, is built on a combination of the carrot and the stick. On one hand, legislation will require retail outlets to accept the digital ruble—first large retailers, then medium and small businesses. Budget payments, including pensions and salaries of public servants, will begin to be partially transferred to the new platform. This will make settlements completely transparent for the Federal Tax Service. On the other hand, acquiring for the digital ruble is legally capped at no more than 0.3%, compared to the commercial 22% with VAT—making it more profitable than cash. Transfers for citizens will remain free and unlimited, unlike the Faster Payments System (SBP).
A separate trump card is smart contracts. The coloring of money guarantees transaction security, for example, when purchasing real estate or cars, eliminating the risk of fraud by the seller. The Central Bank is also actively developing offline payment technology for the digital ruble, which will allow payments even during mobile internet outages.
My view on the situation
I am convinced that the growth of cash is a forced reaction to the environment, not a conscious choice by citizens. The question is whether the state can reverse this trend. Technical solutions, such as offline mode, are a step in the right direction, but they do not solve the main problem—distrust of the system. As long as people have doubts about stability and transparency, cash will remain a "safe haven." The digital ruble will become truly in demand only when citizens see it not as a control tool but as a real benefit and protection for their funds.