Russia Unlikely to Abandon Cash, Former Central Bank Head Says
In a recent interview, Sergey Dubinin, the former head of Russia’s central bank, expressed his doubts about the country’s ability to completely give up cash. Despite the growing trend of digital currencies, Dubinin believes that some individuals will always prefer cash transactions, particularly to avoid taxation. “I don’t think that in Russia, as in any other market economy country, all participants in transactions will prefer non-cash payments,” he stated. Dubinin estimates that around 5-10% of market participants will continue to prefer cash payments due to the ingrained habit of avoiding taxation.
According to Dubinin, large transactions will still be carried out using non-cash methods, and digital currencies are likely to become more convenient to use as they become equated with electronic money. He also highlighted the importance of cash in providing banks with a source of funds, citing that balances on current accounts, including credit cards, constitute 12-15% of total household deposits. These funds are available to banks at no cost, allowing them to be used for lending or investment purposes.
Russia has already seen a significant increase in non-cash payments, with Central Bank Governor Elvira Nabiullina reporting that they have reached 86% and are expected to grow to 90% over the next three to five years. The Central Bank of Russia also reported a 5.1% increase in cash circulation last year, totaling around $1.45 trillion. Deposits and withdrawals at banks’ cash offices and ATMs amounted to around $710 billion and $740 billion, respectively.
A recent poll conducted by the Public Opinion Research Center found that more than half of Russians, especially young people and those living in major urban areas, believe that cash will no longer be used for daily transactions in 20 years. Almost 80% of respondents said that plastic cards are easier and more convenient than cash, while only 18% said they trust cards less than cash, citing reasons such as fear of losing them and a general distrust of banking services.
As Russia continues to navigate the shift towards digital payments, it’s clear that cash will still play a significant role in the country’s economy. With its convenience, anonymity, and widespread acceptance, cash is unlikely to disappear completely, even as digital currencies become more prevalent. As Dubinin noted, there will always be a percentage of people who prefer cash payments, and it’s up to the banking system to adapt to these changing trends.
