Over the last two years, Russia has been studying application of blockchain technology to facilitate payment transfer within the Eurasian Economic Union though a Fintech Association created under the central bank. In 2016, the association tried an Ethereum fork, Masterchain, successfully and completed its operational version in 2017.
Last month, Russia-based News Agency, Tass, reported that the Central Bank was considering the use of Masterchain to build a single payment system.
At the time, Olga Skorobogatova, the First Deputy Chairman of the Central Bank said the government was exploring Masterchain and several other technologies that would enable the country to sidestep current systems like SWIFT in transmission of financial information and payment settlement.
A source close to the Central Bank of Russia informed Izvestiya that authorities are presently discussing which blockchain solution the bank should adopt, it could either pick a local solution or go for an existing option like Masterchain.
Moscow continues to increase blockchain application ahead of introduction of cryptocurrency regulation that is scheduled to take effect in July, 2018. Integration of the technology in the SPFS system is aimed at improving reliability compared to SWIFT, a network that has suffered security bleaches including hacking, in the past few years.
BKF Bank’s Analytical Department Head, Maxim Osadchy says, “The use of blocking technology will undoubtedly increase the level of protection of SFFS in relation to hacker attacks. This is particularly relevant, considering that some banks, including Russia’s Globex, have become targets for cyber attacks through the SWIFT system.”
Petr Pushkarev, the chief analyst at Teletrade has even hinted that blockchain technology could be a more reliable way of powering payment systems than SWIFT. As a modern solution, there is a high likelihood that blockchain will also enhance transparency and security in the financial sector, an issue that is banks as well as customers consider critical.
This is a big step and there is already a feeling that it will not be the last.
It is not clear yet how much moving savings the banks will make from the switch from SPFS network to blockchain. However, each international transaction made via SPFS costs between $0.03 and $0.18 compared to an average of $0.42 on Ethereum blockchain.
The deteriorating relationship the country has with the West, particularly the UK, may have pushed it into finding an alternative payment network. Already, London has announced its intention to get Russia’s banking system out of SWIFT. This explains why Russia’s Central Bank is keen on developing a system that can be used within the European Union.
But beyond its relationship with western countries is a desire to rule the blockchain world. The country’s move to switch from SWIFT is perhaps the biggest indication of Russia’s commitment to ‘own’ blockchain.
Just last week, it emerged that during the International Standards Organization (ISO) meeting in Tokyo last year, Grigory Marshalko, the Russia’s head of delegation claimed blockchain technology will be owned by Russia.
According to a delegate present at the meeting, Marshalko said, “Look, the internet belongs to the Americans, but blockchain will belong to us.”
Last year, Anton Siluanov, Russia’s Finance Minister said countries should not stay on the sidelines of cryptocurrencies. Russia is one of main players in blockchain technology. In pursuit of its blockchain interest, the country’s president, Vladimir Putin has met Ethereum’s co-founder, Vitalik Buterin and included blockchain in his digital economy plan, saying his country cannot be left behind in the blockchain dominance race.