Russia is creating an Ethereum-based ledger system called Masterchain to drastically cut the costs and red-tape associated with verifying and clearing financial transactions. This comes quickly after President Putin met with Ethereum designer Vitalik Buterin in St. Petersburg earlier this year.
One of the priorities for Vladimir Putin and the head of the Bank of Russia through the end of next year is the ‘professionalization of Russia’s banking system.’ You can read the report issued by the Russian Central bank here if you like.
I read through most of it. Because I’ve got nothing better to do on a Friday night, apparently.
There are a lot of things discussed in that 140+ page document but the main point is what I highlighted above.
Improving Russia’s internal handling of financial transactions to make it a more desirable place to do business and park capital is the top priority.
It’s imperative that this occurs if Russia wants to be the regional hub for trade around Central Asia and the growth to be associated with China’s One Belt, One Road system.
A major factor in this is eliminating the potential for fraud and corruption within the paper trail. Corruption is still endemic in Russia. Putin acknowledges this and his desire to embrace blockchain technology to quickly upgrade his country’s financial capabilities is proof of his sincerity in improving things.
Putin and Bank of Russia Chief Elvira Nabullina have done an admirable job maintaining Russia’s national balance sheet in the face of continued U.S. hybrid war provocations, the latest of which is the expanded economic sanctions signed by President Trump.
But, there’s a lot more to be done at the nuts and bolts level. Ethereum can obviate the need for things like notaries and government clerks filing endless paperwork, etc. And that frees up both human and physical capital and removes barriers to business that will allow Russia to quickly catch up to its Western peers and lay the foundation for the future that is envisioned by its leadership.
From the article at The Duran:
The blockchain is special platform that allows two or more partners to enter into a smart contract without an intermediary. The technology may also be used to verify contracts, intellectual property rights, and online public ledgers without a third party.
This may be a breakthrough for the global financial system and other industries. Eliminating intermediaries such as public notaries can slash costs by up to 80 percent, as reported by FinTech Association.
A number of Russian banks are planning to launch a commercial application of the system for mortgages by mid-2018, including Otkritie, Alfa Bank, and TCS Group.
The Central Bank of Russia has already started a pilot of an ethereum-based blockchain to process online payments and verify customer data.
Announcements like these are timed to limit the damage done by the incoming sanctions. Implementing this system is a way to counteract some of the effects of the sanctions by making it harder to ignore Russia as a destination for capital.
Remember, sanctions are nothing but barriers-to-entry. They are protectionism. And protectionism creates black markets, i.e. it drives capital to find new ways to do what it wants to do anyway.
Like invest in a country that most people in the world want to do business with.