At the end of last month the Bank of Russia shared the business model for its central bank digital currency (CBDC). All digital ruble transactions will be free through to the end of 2025, with the first batch of banks and merchants expected to go live on July 1. The central bank plans to earn fees for operating the system. Meanwhile, last week at a hearing in Russia’s State Duma, the Association of Russian Banks (ABR) said that banks are unhappy.

They are concerned with the potential outflow of bank deposits and the costs of implementation. Russia is not planning CBDC holding limits. According to ABR chair, Anatoly Kozlachkov, the set up cost is around 100 million rubles ($1 million) per bank, Info24 reported. He noted that some banks only have $3 million in capital. Senior legislator, Anatoly Aksakov, who chairs the Financial Markets Committee of Russia’s State Duma, is irritated by the pushback from banks. Given Mr Aksakov’s previous remarks, it’s surprising banks aren’t objecting harder.

Last year Mr Aksakov said, “Perhaps a bank is not needed as an institution, since the digital ruble will be very much automated.”

The digital ruble business model

Turning to the central bank’s plans for charging, all transactions with the digital ruble will be free for consumers. That includes transactions between consumers (C2C) and from businesses to consumers (B2C). However, consumer to business (C2B) transactions will attract fees from 2026 onwards.

The model works with all revenues going to the platform operator, which is the central bank, and then the central bank paying some fees out to payment providers. The central bank keeps a cut, which is a third for business to business (B2B) transactions and around one sixth for consumer to business (C2B) payments.

For C2B payments, the business recipient has to pay 0.3% fees with an upper limit of Ruble 1,500 ($14.34). For the same transaction, the central bank will give the payment provider used by the consumer 0.1% with a maximum of Ruble 500. And the recipient’s payment provider will receive 0.15% with a maximum of Ruble 750. Payments relating to housing and community services attract a lower central bank charge of 0.2% rather than 0.3% with a maximum charge of Ruble 10. The payment providers receive lower fees for these housing payments.

Business to business (B2B) payments attract a flat central bank rate of Ruble 15 (14¢). The payment provider for the payer receives Ruble 10 for the B2B transaction.

Meanwhile, it’s not only banks that are pushing back. Merchants are concerned about the timetable. So much so that the Ministry of Trade is now involved on their behalf.

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Germany’s DekaBank has received a bank crypto custody license from German regulator BaFin and the European Central Bank (ECB). We believe Commerzbank was the first German bank licensed last year. However, other major banks have not received licenses, including DZ Bank.

BaFin has issued another 11 crypto custody licenses, mainly for crypto firms. One of them is the digital asset custody subsidiary of Hauck Aufhäuser Lampe Privatbank.

The difference with DekaBank and Commerzbank versus the crypto firms is they are licensed under the Banking Act (KWG).

This is DekaBank’s second new license this year. In July it received a license as a crypto securities registrar for the German issuance of DLT-based digital securities. These crypto securities don’t require a central securities depository (CSD) for issuance.

DekaBank is very active in the digital asset space. It is the founder of SWIAT, the blockchain platform for digital securities in which Standard Chartered and LBBW are also investors. In September Siemens used the platform to issue a €300 million digital bond.

Our understanding is that a crypto custody license is not needed for crypto securities, but is required for cryptocurrencies.

As part of the announcement, DekaBank said this allows the bank to operate throughout Europe under the EU’s MiCAR crypto legislation.

A MiCAR holdup?

We’ve previously reported that there’s a bit of a challenge with MiCAR for German institutions. In October 2023 a draft version of the Supervision of Crypto Markets Act (KMAG) was introduced. It’s the piece of legislation that supplants Germany’s old crypto rules with MiCAR. The problem is this legislation has not been passed and with the collapse of the German ruling coalition, it’s not likely soon.

Hence, while in theory DekaBank’s license will allow it to operate in the EU, we believe that may be subject to the passage of the KMAG law. We contacted DekaBank to confirm, but didn’t receive a response in time for publication.

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Atom Accelerator (AADAO), a decentralized autonomous organization (DAO) on Cosmos Hub (ATOM), and Neutron, Cosmos’ integrated application network, have each pledged $250,000 to support the development and maintenance of Confio’s CosmWasm in 2025, as reported to Finbold on Tuesday, December 17.

With early funding, AADAO and Neutron aim to secure priority consideration in Confio’s future endeavors and encourage other stakeholders to follow suit. 

CosmWasm adoption and funding

Confio has been working on CosmWasm since 2020, and so far, the smart contract framework has been adopted by nearly 100 blockchain networks. 

CosmWasm lets developers build decentralized applications (dApps) that interact across the Cosmos interchain. 

Over the last year, CosmWasm dApps generated more than $5.7 million in fees within the Cosmos ecosystem.  

Despite the broad adoption, the funding for CosmWasm has mostly come from the Interchain Foundation (ICF). 

However, following the recent ICF restructuring, Confio’s budget for 2025 has been significantly reduced, resulting in a lot of doubt in regard to the future of the platform.

CosmWasm Coalition

Atom and Neutron investments are part of the newly launched CosmWasm Coalition, which builds on previous support from the Cosmos Hub, including a $1.25 million allocation under Proposal #103 in March 2023. 

The coalition aims to raise the $2 million necessary to keep CosmWasm growing in 2025 and allow Confio to focus on security, performance optimization, feature development, source development kit (SDK) compatibility, and the overall developer experience.  

Relying on CosmWasm for permissioned smart contract capabilities, Cosmos Hub sees Confio’s framework as an essential component of its network. 

A number of consumer chains leveraging Cosmos Hub’s Interchain Security also depend on CosmWasm, meaning that fresh funds will affect an entire ecosystem.

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