Mintme News


Russian government talks about a blockchain-based payment system, and what it might mean for the use of Crypto in Russia

Nov 30, 2022

           Last Thursday, Russian Federation's President Vladimir Putin took part in the Artificial intelligence Journey 2022 international AI and machine learning conference held under the moto AI-Enabled Technologies for Economic Growth, where he mentioned blockchain being a way to achieve a new payment system, which is an interesting comment since Russia had previously limited the use of crypto for his citizens.

During his speech, Putin mainly talked about the advances in AI technologies, how Russia is developing new advances in that field, and the possible applications he intends to give them in many sectors of the Russian economy. Near the end of his speech, Vladimir mentioned settlements as "possible methods of attack under the current circumstances of illegal restrictions" he complained the current system of international payments is expensive and controlled by a small club of states and financial groups.

Russia's President proposes the combination of cutting-edge technologies with humanity's thousands of years of experience as a way to create a new system, mentioning the ancient technique of the Hawala system of remittance that has been used in international payments for hundreds of years now.

If you need to know what the hawala system is, I'll try to explain it. Briefly, it is an informal value transfer system in which the money is sent from location "a" to "b" through the use of intermediaries (Brokers) at both locations, e.g., John is in the country "a" and needs to pay Michel in the country "b," John gives the money to a broker in the country "a" which then gives the money to another broker on land "b" then, he will complete the transaction giving Mike the money. This practice is recorded to exist since before the 8th century and was used mainly in transactions between Muslims, Arabs, and Indians on the silk road.

Vladimir's final comment regarding the current international settlement system during his speech at the conference was a mention of blockchain as a way of achieving a new payment system free from being centralized, "The technology of digital currencies and blockchains can be used to create a new system of international settlements that will be much more convenient, absolutely safe for its users and, most importantly, will not depend on banks or interference by third countries." Putin said he is confident that a system like this will be created and developed, and then continued talking about artificial intelligence, the conference's main topic.

We know Russia limited the use of cryptocurrencies back in 2020 when they allowed Russian residents to hold crypto but forbid them to use it for payments and other financial applications, back them it seemed they weren't so in favor to the use of cryptocurrencies, however, the Russian nation President's comments at this conference aren't a big surprise, it was speculated that Russia might end up adopting cryptocurrencies after the international sanctions applied to the country after the controversial invasion of Ukraine early this year, and this possibility has been mentioned many times by different sources, for example, the past month, Elizabeth Rosenberg, Treasury's assistant secretary for Terrorist Financing and Financial Crimes, said to US senator, Elizabeth Warren, that it was possible for Russia to evade sanctions through the use of cryptocurrencies, it was mentioned that other countries had done this before, but, since crypto exchanges are often transparent they usually recur to the use of tools to mask the origin of the transactions, such as Tornado Cash, which was sanctioned by the US treasury this August. Also, Russian news site Kommersant reported that Deputy Finance Minister Alexei Moiseev informed that the government had agreed with the central bank on a rule allowing cross-border payments using cryptocurrencies. Let's remember that at the beginning of this year, Russia's central bank proposed banning the use and mining of cryptocurrencies on Russian territory.

Putin didn’t make any mention of Russia starting the Blockchain payment system he talked about during his speech. Still, we see signs of them being more receptive to cryptocurrencies, or at least blockchain technology, so now we wonder if we might see a Russian Federation that might adopt cryptocurrencies as a whole in the future, like El Salvador, the first country to accept Bitcoin as a legal tender with his "Ley del Bitcoin" in late 2021.

Hector Borges