The Bank of Russia (BoR) has shared its central bank digital currency (CBDC) business model, which includes free consumer-to-consumer payments. However, local banks are fighting back, accusing the government of planning to put them out of business.
Two years ago, Russia’s CBDC development was moving sluggishly. Then came the sanctions following its conflict with Ukraine, and since then, the central bank has expedited the development of the digital ruble to ease the pain of the sanctions. In its latest move, it has published the business model for the CBDC, which it expects to launch in the first half of next year.
Key to BoR’s plan to spur the adoption of the digital ruble is making it the cheapest payment method in Russia. To this end, all payments between retail consumers will be free permanently. Businesses sending digital cash to retail users will also not incur any fees. Consumer-to-business (C2B) and business-to-business (B2B) payments will incur fees, but the central bank will give the users a one-year grace period of zero fees to spark adoption.
Once the fees kick in, the central bank will collect them and then redistribute a portion to the payment platform operators, be they banks or fintech apps. For B2B payments, BoR will take a third of the fees and a sixth for C2B payments.
In B2B payments, the top bank will charge a flat rate of 15 rubles ($0.14) and then hand 10 rubles ($0.1) to the payment provider of the paying business.
C2B payments will be more complex. The receiving business will pay 0.3% in fees, with an upper cap of $14.34. The payment platform used by the paying consumer will receive a third of the fees, with a maximum of $5. The payment platform of the receiving business will receive a slightly bigger cut, but it will be capped at $7.3. However, BoR will subsidize payments relating to essentials like housing and community services.
BoR believes that the digital ruble’s low fees—and zero fees in some transactions—will attract Russians. Digital payments have been on an uptrend in the country, surging from 38% in the first quarter of 2017 to 63% in Q1 2023.
Russian banks oppose digital ruble
Despite the promise of the CBDC, Russian banks are opposed to the digital ruble’s implementation. In particular, lenders have criticized the high implementation costs and the government’s apparent plan to drive them out of business.
Appearing before Parliament, the head of the Association of Russian Banks (ABR), Anatoly Kozlachkov, told legislators that the costs on the banks are prohibitive, claiming that they could go as high as 100 million rubles ($1 million) for each bank.
“The proportions of costs for the introduction of the digital ruble should be adjusted – or approaches should be differentiated, taking into account the specifics of the players,” Kozlachkov told the State Duma, as reported by one local outlet.
The banks are also concerned about disintermediation and the risk of liquidity outflow once the CBDC is live. In most economies, central banks have imposed a holding cap on their CBDCs, limiting the amount of money users can hold outside the banking sector. The European Union, for instance, has proposed a €3,000 and €4,000 cap for the digital euro.
However, some legislators dismissed the banks’ concerns. One is Anatoly Aksakov, the influential head of the State Duma Committee on Financial Markets, who reportedly claimed he still can’t understand the lenders’ resistance. Aksakov has previously claimed that banks might no longer be needed in Russia once the digital ruble launches.
Neo-banking leader T-Bank to launch tokenized investments
Still in Russia, the country’s largest neo-bank, T-Bank, is set to launch tokenized investment services for its clients starting next year.
The lender, formerly known as Tinkoff Bank, received a license from the BoR in March to offer ‘digital financial assets. It joins its rivals, Sber Bank and Alfa Bank, which currently dominate this nascent field.
T-Bank announced that it has partnered with Atomyze, a local tokenization firm, to launch the tokens. The tokens will underpin loan products, financial obligations of small- and medium-sized enterprises (SMEs), art tokens, and more. They will be issued on a private blockchain network developed by Atomyze (which was sanctioned by the United States this year) and supervised by the central bank.
T-Bank says that the use of blockchain and smart contracts allows it to cut costs of issuance and “create fundamentally new products not currently available on the traditional finance market.”
The bank, founded by the now-exiled Oleg Tinkov in 2006, will also launch the trading infrastructure for the tokens. Retail users will have access in a few months, and professional clients could start trading in a few weeks.
Watch: Finding ways to use CBDC outside of digital currencies
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