Russia makes major advances in blockchain, DLT
Russia is now employing blockchain technology and DLT in major segments of activities:
While the Russian Government is positive about any new technology, it is particularly responsive towards blockchain, especially DLT, which has seen substantial use in the financial services industry in the country. Several DLT-based projects are being implemented by financial institutions and banks, unlike in the US or Europe, where such technologies are largely prerogative of new age banks or fintechs or digital only enterprises.
The Central Bank of Russia has been specifically recognizing DLT based initiatives like electronic mortgages, digital letters of credit and digital bank guarantees. Similarly, there is a blockchain based platform for e-proxy shareholder voting mooted by the National Settlement Depository, the central securities depository of the country. The platform takes care of blockchain-backed commercial bonds.
USE IN ELECTIONS
One unique use of blockchain other than in financial services in the country has been in elections. Very recently the government created a blockchain based voting platform during the city parliament and municipal governments elections. Besides, there is `Active Citizen’, the government’s platform for public polls, which is created using blockchain. There are also similar tools used in the registration of transactions in the real estate sector.
The Russian Federal Tax Service has created a blockchain-based platform for banks to provide interest-free loans for payment of salaries to staff of companies affected by covid pandemic, including MSMEs.
REGULATEORY SANDBOX
The central bank has launched a regulatory sandbox for testing innovative financial technologies, including DLT and services on the financial market in 2018. It functions under the Digital
Economy National Program adopted by the government in 2017 and also the central bank’s Main Directions for Development of Financial Technologies for 2018-2020. The sandbox is targeting projects in the spheres of bid data and machine learning, artificial intelligence, biometric technologies and DLT.
DIGITAL CURRENCY
In October 2020 the central bank has come out with a consultation paper on the potential introduction of the Central Bank Digital Currency (CDBC), or digital ruble. According to the consultation paper, the digital ruble will be a digital form of the national currency and have all features to serve as money and will be issued by the central bank to become yet another form of money in addition to cash and cashless money. The central bank is planning to ensure seamless integration between the CDBC and other payment forms and is planning to issue CDBC as tokens on a distributed ledger. It is expected that a prototype will be ready by end-2021 and will be built on a hybrid platform combined with DLT. The central bank said it is moving forward with its CBDC to “help reduce costs for households and businesses, increase the speed of payments, and develop innovative products and services in the financial industry and the economy in general,
BANK GUARANTEE
One notable development in the realm blockchain is the recent issue of digital bank guarantee by VTB, a leading Russian bank. The bank guarantee was issued on the Masterchain blockchain, which is in production. Masterchain is an Ethereum blockchain variant that uses Russian cryptography. It is co-developed by the Bank of Russia and commercial banks, and is operated by the Fintech Association. The other organizations on the platform that can issue guarantees are Gazprom Neft, Alfa
Bank, PSB, Raiffeisenbank and Ak Bars. Each participant has its own node on the network.
Sberbank, a state-owned Russian banking and financial services company, and telecom firm MTS, the leading Russian telecommunications operator and digital service provider, had earlier successfully completed the country’s first commercial bond transaction using blockchain. The transaction was placed through a proprietary blockchain network system operated by the National Settlement Depository (NSD).
Alfa-Bank, which is one of the largest private banks in Russia, is exploring applications based on Blockchain technology to automate services for freelancers and self-employed workers. It involves the whole process of registration and payment for self-employed people, along with income registration and other add-on services.
Some of the top blockchain technology companies in Russia include MixBytes, which takes up blockchain and DApp development, Maxilect, which connects talented IT professionals throughout Russia, to take up complex projects, Edone, an IT outsourcing company that helps to bring ideas to life, HWdTech, a software development company specializing in blockchain and Evrone, an engineering company successfully delivering high-quality digital products.