Ilya Lopatin
Ilya Lopatin

Blockchain and Bitcoin in Russia: what’s happening in legislation and projects

The following is a guest post from Ilya Lopatin.

Ilya Lopatin
Ilya Lopatin

In the last year, the Russian authorities, known for their habit to ban things, have fundamentally changed their attitude to digital currencies and especially blockchain. Today, we can talk if not about support, then at least about non-interference in the sphere of blockchain developments by the government. Meanwhile, the major banks have managed to launch a number of pilot projects and estimated the potential of decentralization.


Russian legislators don’t hasten to regulate Bitcoin. In general, the crypto community is fine with the situation, as all previous attempts were limited to bans and penalties. Different versions of 2015 draft law on cryptocurrency regulation were criticized for unreasonably strict measures towards bitcoiners and were not reviewed by the parliament.

But the situation has changed for the better in two years: nobody, including government officials, talks about bans today. Cryptocurrencies and blockchain have serious advocates now, for example, the head of Sberbank German Gref, known for his liberal attitudes towards innovative technologies in the economy.

The task to formulate the concepts of digital currency regulation in Russia was entrusted to the Ministry of Finance, the Bank of Russia, the Federal Tax Service, and the FSB (Federal Security Service). Their representatives make up the parliament’s work group.

According to the head of the group Elina Sidorenko, the next attempt to legislatively define Bitcoin can take place late 2017.

She says that there are several concepts of defining cryptocurrency: as a monetary means, a good, a payment instrument, or a substitute for cash (the latter was often used in older draft laws). However, there is no distinct concept available: legislators decided not to make any sudden moves and to learn the world’s experience.

But meanwhile the officials are sitting like the Dutch sculpture Homunculus loxodontus, regulation issues are being actively discussed by the community at specialized conferences. For example, a session dedicated to legal issues will take place as part of Blockchain & Bitcoin Conference in Saint Petersburg on June 22. Perhaps, by that time the work group will come to some concrete understanding of the subject matter.

Blockchain in banking 

Far more interesting processes take place in banking – the industry that takes the lead in the adoption of the blockchain.

The main blockchain provider in Russia is Sberbank, the largest country’s bank, controlled by the national regulator. By 2017, Sberbank has launched 15 pilot blockchain-based projects.

They include a platform for consumer electronics suppliers that operate under factoring agreements. The project mitigates the risks of factoring agents, expedites payments to suppliers and eliminates the necessity in phone calls, email correspondence, and paperwork.

In 2016, the bank, together with the Federal Antimonopoly Service, launched a pilot project called Digital Ecosystem – an open protocol that allows storing and processing data without resorting to telecom carriers, as well as using a digital signature.

The bank also plans to adopt blockchain in order to close quick real estate deals and remotely cater to financial institutions (the latter project is developed together with IBM).

The head of Sberbank German Gref estimates the potential of blockchain technology as “fantastic” and predicts that the industrial use of the technology will start in 2019.

Another major bank, Alfa-Bank, together with S7 Airlines, conducted an experimental letter of credit deal using smart contracts. The letter of credit was opened and executed through Ethereum blockchain transactions. Each transactor had access to the following data: identification numbers of the customer and contractor, type of activity, letter of credit amount, the opening and closing date.

Other banks also joined the blockchain race in some way or another. Vnesheconombank (VEB) announced the development of the proprietary blockchain and chose a contractor. The system should provide a reliable record of investment process events, documents, sums, and terms. According to the plan, all these things will be available to the representatives of VEB, bank’s customers (via applications), and contractors.

And what about the Central Bank? Today, we know that the regulator is elaborating a pilot project based on Masterchain, an Ethereum-based blockchain prototype intended to record data on transactions and their participants. It is expected that the industrial use of the blockchain system in the financial and non-financial markets will start in 2018. The Central Bank even stated the intention to promote the blockchain technology among market players “for them not to lag behind in technological development”.

The government’s stance on blockchain is much softer than on Bitcoin. The Prime-Minister Dmitry Medvedev made a public statement, saying that major banks, corporations, and some national regulators are adopting blockchain. In March this year, he instructed the government to learn the potential of using blockchain in Govtech and economy.

Alternative use

Among the non-banking applications of the blockchain, one should mention the projects of AIRA (Autonomous intelligent robot agent). Their flagship project is a drone management system Drone Employee that uses smart contracts.

According to the project manager Sergey Lonshakov, the disadvantage of existing solutions for controlling smart devices lies in centralization, as the central node should be able to “use the language of every device”. Whereas Drone Employee is a decentralized autonomous system, realized based on the case studies of the rapidly growing drones market.

Drones execute instructions by the means of transactions in Ethereum, where the local currency transactions do not equal to money but trigger the operation of network nodes, between which the smart contract was concluded. In other words, robots ensure that all contract terms are fulfilled correctly.

More information about the Russian market of blockchain developments will be presented at Blockchain & Bitcoin Conference St. Petersburg on June 22. It will bring together leaders of the Russian blockchain industry, bankers, software manufacturers and legal experts. The registration for the event is already open.

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