Why Russian Government Should Forget about the Blockchain Technology

30.01.2016

Last week, Russia’s ‘official’ bitcoin enthusiast and, as a second job, the head of Sberbank, German Gref, has finally found an ally, Alexei Kurdin, former minister for finance. A bit earier, speaking at Gaidar Forum, Gref stated that “all government systems, and education, including everything from kindergartens to universtities, have to be changed in the first place”.

Many in Russia recall the sensational speech where Gref called Russia ‘a downshifter country’ and thus brought down public anger on himself.

In tactical terms, Gref’s activity forms a logical sequence:

Head of Russia’s biggest financial company, which actively invests in IT, claims that the country faces serious issues. Had Gref been a more IT-inclined person, he’d probably say Russia needs its OS to be upgraded.
In just a few days’ time, having a business lunch with the former minister for finance, Gref stated that public management problems are soluble with the blockchain technology. In history books yet to be written, this day will be considered the birthday of Russia’s official blockchain community. Other prominent figures may join it in no time.
Finally, immediately upon that, Gref briefly told media that Russia “cannot miss” the blockchain technology.

However, so much for Gref. Most probably, the government will announce some kind of blockchain-related project before long.

Looking at those shamanistic rituals around blockchain from another perspective is way more interesting. Development of innovations in Russia is of much greater concern. Notably, Russia’s prime minister Dmitri Medvedev recently stated that so-called ‘innovation centers’ at Skolkovo and Rosnano are subject to possible liquidation with some new, ‘more efficient’ innovation center established in their stead. On the contrary, according to Kommersant, Mikhail Abyzov, the minister for the ‘open government’, offered to reform the management system for those institutions by merging them into a unified state-owned corporation. The proposal, however, failed to awake an echo in Medvedev’s heart.

This gesture essentially means that the governemnt acknowledges the modernization project has failed. Unfortunately, if they handle the blockchain technology in Russia’s traditional ‘vertical’ format, it would end up similarly. This reminds of a famous utterance by now-late former prime minister of Russia, Viktor Chernomyrdin. In the early nineties he said, that when they try to make it “better” in Russia, they end up doing it “as usual”.

Let’s consider the notorious block size debate in bitcoin community as an example. There are several opinions in this regard, and each of them has their own justuification and supporters. If we imagine the same debate occurring not in an international libertarian community, but in the Russian parliament, it would be a great TV show in the best case; in the worst case, it will end up with a soultion benefiting the most influential players and completely ignoring the rest. That’s the way it has always been in Russia.

Historically, the less the government interferes in technologies, and the less it tries to modernize the economy in a centralized way, via establishing innovative pitholes for money laundering like Skolkovo, the better. Currently, Russia as a state is not ready for new technology, as well as it is not ready to abandon its ambitions to regulate everything it can.

Russia’s political structure implies that decisions like regulation moratorium for bitcoin and cryptotechnologies require a political will. Alas, Russia lacks it altogether.

by Toly Kaplan

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Tags: regulation, Russia