Bank of Russia has introduced Masterchain, an Ethereum-based Blockchain prototype. As stated in the official report, the Masterchain platform was created to serve interests of the financial market actors and is being tested.

Alexey Arkhipov, Head of Cryptotechnology Department at Qiwi says:

“Masterchain is a unique ecosystem which allows connecting financial institutions and creating smart contracts in one single environment.”

Disruptive Blockchain

Masterchain is a tool built on the basis of distributed ledger technology to ensure safe and secure communication between banks and other financial institutions. The platform allows to quickly confirm the relevance of customer’s data or information about transaction, therefore accelerating the exchange of information between the parties while ensuring the highest level of security and confidentiality in financial transactions.

A number of country’s largest banks and financial institutions took part in developing the Masterchain prototype, including Sberbank, Alfa Bank, Bank Otkritie, Tinkoff Bank, and Qiwi. Partners share belief in the ability of technology to revolutionize financial industry.

Head of Innovations at the Bank Otkritie, Alexey Blagirev said that rapid development of Blockchain technology suggested an innovative method of communication between banks to receive the latest information about customers and check it with partners if needed.

Nadezhda Avdanina, the head of innovation and technology center at Alfa Bank shared her opinion: “It is a truly significant step for banks, it shows that despite the high level of competition in the financial and banking industry, banks drive towards increasing openness, and making relationship with both customers and partners more comfortable and secure. We are happy that Blockchain technology allowed banks to cooperate and start joined projects aimed at industry recovery.”

VP, CIO at Tinkoff Bank Viacheslav Tsyganov commented:

“The first transaction made to test the infrastructure that we are creating in collaboration with our partners proves the highest potential of Blockchain technology and its applicability in building communication channels between banks. Masterchain is universal, and its applicability is not limited to only building communication channels.”

Alexandr Anischenko, the Head of Business development at Sinimex, a company that has been in charge of building a prototype, emphasized the safety part of the platform: “All data is stored on redistributed ledger and access to that data is granted only to those owning a special key, what ensures the highest level of safety and security. There's no chance that personal details of bank’s customers would leave this system”.

New frontiers

Participation of Sberbank in developing and testing of the prototype of redistributed financial system with Blockchain technology at the core of it - is a significant step towards building a financial infrastructure of a new generation.

Ekaterina Frolovicheva from IT Strategy Department at Sberbank commented:

“Blockchain already allows us managing identification processes, significantly speeding up transactions and simplifying decision making. Sberbank focuses on multiplatform development and explores possibilities of creation of advanced products in convergent IT environments.”

Olga Skorobogatova, the Deputy Chairperson at the Bank of Russia commented:

“Building prototypes and joining forces studying their real-life application allows defining trajectories for future development, evaluating potential of certain technological innovations, as well as analyze possible risks of their application. And it is a good basis for moving forward. Earlier the Bank of Russia initiated the creation of special consortium to study financial technologies, Masterchain will be further studied and tested among other projects ran by the Consortium. There is a possibility that Masterchain will be soon integrated as a part of the next-generation financial infrastructure.”

However, to integrate this solution into practice would require major changes and revisions in the regulatory framework. Here we turn our heads to policy makers.

Cryptomoney cause no harm

While Russia’s financial market giants are so enthusiastic about exploration of Blockchain it seems that policy makers are ready to turn a new page in the history of their relationship with bizarre technologies and products of their application.

Thus, earlier this week, Alexey Moiseev, Deputy Finance Minister said that use of Bitcoins and other cryptocurrencies is no longer considered as a threat to the country’s financial system. The authority made a decision to postpone drafting regulations on cryptocurrencies in Russia.

Moiseev explained:

“The Ministry decided to wait and see how the situation is going to develop. We can’t say that the use of cryptocurrencies is harmful, but we can’t deny that it can become harmful in the future. We are interested to see how other countries choose to regulate cryptocurrencies.”

Until recently, Russian policy makers could not make up their mind on how to deal with Bitcoin and similar cryptocurrencies. State authorities repeatedly made suggestions to impose criminal responsibility for the use of cryptocurrencies. However, as Moiseev explained, the use of alternatives to traditional currencies in Russia is still not so massive, therefore, there is no need for such harsh measures. In July 2016, the Ministry of Finance suggested treating cryptocurrencies as foreign currencies and allow operations with it.

The Russians are slow starters, but they drive fast. Who knows, maybe it is the beginning of the Blockchain revolution in the country? While many will roll their eyes, let us wait and see.