On the sidelines of the International Economic Forum in St Petersburg, President Putin and Ethereum founder Vitalik Buterin met briefly and discussed the direct application of blockchain technology in Russian businesses and particularly banking systems which we may see in the coming years.
The implementation of virtual currencies such as Ethereum in the nation has the potential of improving the economy with faster and safer online transactions. In addition to this Etheruem offers services of smart contracts which can speed up businesses by removing intermediaries – including trade deals, currency contracts, insurance contracts, and property rights. Investment in such technology could provide a powerful enhancement to a nation’s economy.
Vlad Martynov, adviser for The Ethereum Foundation, says:
“Blockchain may have the same effect on businesses that the emergence on the internet once had -- it would change business models, and eliminate intermediaries such as escrow agents and clerks, if Russia implements it first, it will gain similar advantages to those the Western countries did at the start of the internet age.”
Russia has been pursuing technologies that haven't already been claimed by the other great powers the West, China or Japan in order to diminish the dependency on oil. In 2007, Russia set up and invested in a large-scale nanotechnology company, Rosnano. However it did not provide the breakthrough they were hoping for, nor did it find relevant projects to invest in.
Last year, a new project developing a hyperloop train received high investment, in prospect to create a train which rides through a tube in speeds of over 700 miles per hour. But this project got caught up in a court case which involved a Silicon Valley startup's founders as well as claims of financial mismanagement.
Cryptocurrency appears to be Russia’s new investment in innovative technology. The value of Ethereum surged when its investor confidence increased, due to this newly sparked interest. Over the past year, the value of one Ethereum has seen growth from $10 to around $350, an almost 3,500% increase.
The Central Bank of Russia has begun testing a number of digital currency pilots toward the development of a national digital currency. This comes after a procession of banning and unbanning cryptocurrencies in the country, which initially regarded them as “money surrogates." It was even considered to condemn people to prison for using digital currency. This year, however, this idea was dropped and the attitude reversed as banks and the government are endorsing the blockchain with new laws being developed. In fact, the Bank of Russia is interested in developing a national cryptocurrency of its own.
Russia may therefore be the first nation with cryptocurrency. Olga Skorobogatova, deputy chief of Bank of Russia, stated:
"Regulators of all countries agree that it’s time to develop national cryptocurrencies, this is the future. Every country will decide on specific time frames. After our pilot projects, we will understand what system we could use in our case for our national currency."
Whichever country becomes the first to nationally embrace this blooming technology can gain a significant economic advantage over the rest of the world – just as Britain did with the invention of the railway, or as the US did with the mass-production of cars.
The romance between Russia and cryptocurrency is one the world will be watching as it develops.
Picture from Wikimedia Commons.
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I am a student at Utrecht University College, majoring in anthropology and international relations. Interested in culture, philosophy, politics, travel, music and art