Blockchain is the answer to Russia’s settlement issue, says bank manager

The adoption of blockchain is the right direction for Russia to solve its current settlement problems, according to an executive at Russia’s largest bank, Sberbank.

Blockchain technology has matured in recent years to offer new opportunities that potentially enable Russia to create more efficient payment systems, said Sberbank First Deputy Chairman Alexander Vedyakhin.

On March 14, Vedyakhin attended the meeting of the Federation Council of Russia on the budget and financial market committee, highlighting the promising future of blockchain in Russia, local news agency Interfax reported.

According to Vedyakhin, the distributed ledger technology (DLT) is a good basis for a new payment system due to its decentralized nature and privacy-enabling features. He stated:

“Because it is a distributed ledger, there is no single point of decision-making, no center, no switch that can be turned off; everyone has an overview of everything, and there are special protocols that allow you to do this confidentially.”

Vedyakhin added that Sberbank is currently actively exploring the implementation of blockchain technology for payments. “We are sure that Sberbank and other colleagues from the central bank will find this solution,” he stated, expressing confidence that blockchain will become more relevant in 2023. The head of Sberbank said:

“The next generation of payment systems will be on the blockchain.”

In his speech, Vedyakhin also noted that blockchain has developed rapidly in recent years, with developers managing to find solutions to problems such as limited scalability and limited privacy. These blockchain issues have been resolved so far, he added.

According to Mark Smargon, CEO of the permissionless public ledger project Fuse Network, there is no technical reason preventing Russia from creating its own blockchain-based system.

“Mass adoption by mainstream businesses and their consumers is just around the corner thanks to the latest developments in scaling and privacy technologies, especially on EVM-compatible systems, which have become the standard for experimentation,” Smargon said in a statement to Cointelegraph.

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He noted that fully online real-time cross-border payment settlement technology is “only a matter of time”, with technology having matured significantly over the past few years. At the same time, Smargon questioned whether blockchain could enable economies to circumvent international sanctions, saying:

“It needs to be clarified when this technology will be widely adopted and whether it will enable users to circumvent international sanctions. Blockchain enables better transparency, and disintermediation is not only a solution for illegal activities.”

The news comes as Sberbank is winding down its Ethereum-based decentralized finance platform, which it plans to trial by May 2023. Russia’s largest bank has also been working on an international settlement platform that would serve as an alternative to SWIFT. According to Sberbank CEO German Gref, the company plans to complete the configuration in 2023.