Central Bank of Russia forms new blockchain consortium

The Central Bank of Russia has formed a consortium with other financial institutions, including QIWI Group, BINBANK and MDM Bank, to investigate the potential of blockchain technology within the industry. The consortium will look at Blockchain's integration with cloud technologies, big data management, and identification systems, in addition to developing regulatory framework, researching possible risks, incorporation of financial solutions, international collaboration, global integration and raising awareness. The first prototypes are expected to be tested by year-end​.

The Central Bank of Russia and a number of large financial institutions sign a memorandum to begin collaborative work on researching and testing of Blockchain technology.

Creation of a special consortium for researching and testing Blockchain technology has long been a topic of discussions between players of country’s financial market. Concrete actions finally take place when the Central Bank of Russia and a number of large financial institutions sign a memorandum at the XXV International Financial Congress in St. Petersburg which marks a beginning of collaborative work.

Russian banks recognize the potential of Blockchain

Blockchain technology is often seen as being able to significantly supplement, and even transform principles of financial market operation, bringing new effective models of cooperation between participants, and increasing accessibility and reliability of financial services while lowering their costs.

The potential of Blockchain technology is best unveiled through collaborative work of a number of financial sector players.

Olga Skorobogatova, deputy chairman at the Central Bank of Russia said that several banks and financial institutions, including QIWI Group, Accenture, BINBANK, MDM Bank, Bank “Otkritie”, and Tinkoff Bank have confirmed their intention to join consortium.

Skorobogatova states:

“The Central Bank of Russia, as the main regulator is interested in development of Blockchain technology in the financial sector. Through closer collaboration with sector’s players we can find out whether there is a potential for a technology and how it can be used. We are not trying to replace one technology solution with another, but rather supplement one with another.”

What will the consortium do?

Main priorities of the new consortium will include researching and incorporating of Blockchain technology, cloud technologies, management of big data, and development of simplified identification systems.

First prototypes are expected to be tested by the end of this year. Consortium will also actively work on the development of regulatory framework, incorporation of financial solutions, international collaboration and global integration.

In addition, consortium sees raising awareness of Blockchain technology and its application in development of financial services as an equally important objective.

Even more regulation and control to follow

According to Skorobogatova, Blockchain technology already allowed Central Bank of Russia to significantly reevaluate and reconsider principles of work and switch the main focus towards building a trusted partnership.

Therefore, instead of focusing on regulation and control, the Central Bank of Russia intends to communicate with market players and actively research technology and its potential.

Skorobogatova says:

“The authority should take on control and regulatory functions when there is a certain risk. Researching possible risks will be one of the objectives of a newly established consortium.”

Is Bitcoin above the law?

Establishment of the consortium is very timely, as with the rising interest in technology, confusion and uncertainty over its future was increasing as well.

Earlier, president and chairman of the VTB Bank Management Board Andrey Kostin expressed his opinion on the need to create a working group to research Blockchain technology and solve the problem of the legal status of Blockchain and cryptocurrencies in the country.

Kostin said:

“Banks take a closer look on Blockchain technology, however they are still far from embracing all of the benefits it is able to bring. It might not be the panacea to all of the problems in the financial sector, but we need to study this technology to at least understand whether bitcoin is above the law and what we should do with Blockchain”.

The fear of missing out

The first to join consortium was the Sberbank of Russia, which earlier was interested in joining the international R3CEV consortium.

Herman Gref, CEO of Sberbank of Russia, known for his liberal views towards new technologies, including Blockchain and cryptocurrencies, has repeatedly emphasized that the technology is truly revolutionary, and Russia should not miss the opportunity to benefit from it.

Members of the consortium believe that collaboration will advance development and testing of Blockchain technology applications and their standardization. Consortium will serve as a single research and development platform accessible to all participants of the financial market, including foreign ones.

Oliver Hughes, president and chairman of Tinkoff Bank Management Board, commented:

“Blockchain technology has a huge potential, its application will significantly improve the way processes are handled in the financial sector, increasing their efficiency while reducing costs. We are glad to join forces with leading players of Russian financial sector and strongly believe that creation of this kind of platform will accelerate Blockchain revolution in the country, creating win-win situations for both financial institutions and customers.”

Sergey Solonin, CEO of Qiwi Group agrees:

“Within the last few years we saw that the interest in technology has been increasing. Blockchain will allow solving technology problems in financial sector more efficiently and significantly change the mode of interaction between stakeholders. The consortium is our response to increasing interest of society in innovative technologies. I believe we can advance the economy and business to the whole new level.”

We often see that the Russian state is struggling to keep up with the pace of development of technologies. Perhaps establishment of consortium will help state authorities to cope with the fear of everything new and allow the country embracing technology revolution? We are yet to see.