DIGITAL CURRENCY AS A TOOL TO COUNTERACT SHADOW ECONOMIC ACTIVITY
The shadow economy is a normal phenomenon because it is present in many countries, the only difference is the degree to which it manifests itself. Also, the shadow economy is an important part in the whole economic system, so we can consider that getting rid of it completely – the economy as a whole may suffer.
The creation of digital currency means not only creating a more comfortable environment for people, but also improving the payment system, due to its reliability and cost-effectiveness. In the 21st century, most people cannot imagine their life without gadgets, which is the reason why the need to create and implement digital currency in the payment system appeared.
The introduction of digital currency into the economic system can play a very big role in combating illegal activities. Digital currency provides a link to the name of each owner, which means that in the future there will be information about all participants making payments.
Most often, the development of the shadow economy occurs during a financial crisis for society, for example, against the backdrop of a coronavirus outbreak.
The Federal State Statistics Service and the Federal Service for Financial Monitoring measure the shadow economy, but it is impossible to make an objective evaluation of the “invisible” economy. Nonetheless, there are evaluation methods, and an approximate analysis can be made on the basis of Rosstat’s data.
According to the chart in Figure 1, the share of the shadow economy in relation to GDP for 2021 was 15.5%, which is 4.9% less than in the previous year. GDP growth over the period under consideration outpaces the growth of the shadow sector.
Digitalization is rather slow to enter the economic system, as there are conditions that act as barriers to digital currency to combat the shadow economy. The main barriers are:
- Digital illiteracy of the population (i.e. its unpreparedness for digitalization);
- technological problems.
Any transaction made with digital technology leaves a “trace” somewhere, thus creating a history of transactions, which makes it possible to significantly reduce the “shadow” in the economy and illegal activities.
Today, citizens increasingly prefer cashless payments, many refuse cash, as it is more convenient to track the history of transactions, request electronic checks, etc. through the applications of banks installed on cell phones.
Any digital technology has transparency, the digital ruble is no exception, as inherently it is a unique software code, which neither non-cash nor cash form of money has. Today, artificial intelligence, which is introduced into the financial system and helps to track suspicious transactions with subsequent blocking before the transaction is confirmed, is sufficiently developed.
The main tool of the digital ruble is a digital wallet, through which payments, credits, etc. are planned to be made. An individual or a legal entity will be provided with one digital wallet, which will be stored in the Central Bank, thus, it will be possible to manage the digital ruble and control the impact on its transactions.
To summarize, based on the analysis of the above data, we can conclude that for the Russian Federation, the shadow economy is a significant and urgent problem today. The advantages of the digital ruble are sufficient to effectively combat the shadow sector, gray wages, and illegal activities hidden from the state.
The population’s readiness to digitalize the currency is increasing rapidly every year, but the mere creation of the digital ruble remains insufficient to combat the shadow sector of the economic system. To be effective, the population must be motivated to reject wages “in envelopes,” and an effective policy against the shadow economy must be developed.