Nov 05, 2016
Sberbank Official Says National Cryptocurrency Is a Foundation for Digital Economy

Over this year, Sberbank, Russia’s biggest bank, has proven its interest in blockchain technology in practice. The bank has launched several major blockchain-related projects focused on IT, insurance, trade financing, and documents exchange between companies and departments.

Apart from that, a Sberbank’s subsidiary recently claimed it successfully effected an international transaction via their specifically developed blockchain-based platform.

Remarkably, the bank’s employees involved in the special team for blockchain studies give nearly glowing accounts of the technology. In particular, Pavel Khodalev, CTO of Sberbank’s Corporate Business stated at the International Blockchain Week in China that “blockchain for me isn’t the revolution that would shatter the world, but the one that would give it a new way.”

ForkLog contacted Pavel to find out more about the bank’s recent blockchain-related developments and future plans for the technology.

FL: When and how has blockchain technology caught your interest?

Pavel Khodalev: Personally, I delved into blockchain studies in November 2015. Back then Sberbank became seriously interested in the technology, so they trusted me with the task to muster it. Generally, the bank has been testing and watching blockchain since around 2014, when bitcoin has become a significant phenomenon.

FL: Have you ever been involved in blockchain-related projects before that?

Pavel Khodalev: No, I haven’t. This is my first major project related to the technology.

FL: Do you have something to do with the work of a Sberbank expert group that studies blockchain’s capabilities?

Pavel Khodalev: Yes. Almost a year ago they have created a small group consisting of representatives for the Center for Technological Innovations and Corporate Architecture. We jokingly call the group ‘blockchain fan club.’

FL: Will you tell us more about this work?

Pavel Khodalev: We’ve run a series of researches of the technology. We’ve implemented several prototypes, and outlined top-priority areas for blockchain technology implementation in the bank’s business in two years.

Our group also runs an extended educational program aimed at popularization of blockchain both within the bank and beyond. We actively contact with other market players, with the Central Bank, and the ministries and departments that are interested. Recently we’ve translated Melanie Swan’s Blockchain: Blueprint for a New Economy for Sberbank’s library.

Over the last couple of months, we’ve made some announcements about use of blockchain in Sberbank or with participation from Sberbank. Nearly all those projects have been implemented with direct involvement of our working group.

FL: What do you think about Visa’s announcement of a blockchain-based payments service?

Pavel Khodalev: To be precise, Visa has issued, as we say, a paper release, i.e. a declaration of intent. Visa has invested in a startup, and intends to release a blockchain-based alternative for SWIFT next year to exchange financial messages within its B2B Connect program. Some other market players, including SWIFT, have already declared similar intentions.

Generally speaking, it’s a significant announcement that once again stresses the interest for the technology has surpassed the borderline of marginal tech-savvy companies and now the financial industry considers it a highly-promising and important technology.

FL: How could it impact banks around the world?

Pavel Khodalev: It’s hard to make a certain assessment now. On the one hand, it’s good news: new technologies emerge; they accelerate bank operations; and competition between banking service providers increases, which makes services less expensive. On the other hand, this would result in serious technological fragmentation of systems for exchanging financial messages. The cost for businesses will only grow until the fragmentation has subsided.

FL: Last month, Sberbank and Linux Foundation have entered into an agreement to let the bank participate in Hyperledger. What do you work on there?

Pavel Khodalev: At present stage, we’re proceeding with participation in an industrial project for development of the technology under the auspices of Hyperledger. We wish to actively participate in developing the technology and its further employment in our projects.

The Hyperledger platform now is in the phase of active formation and designing, so we may influence its development considering our plans and intentions. Notably, our interest isn’t limited to Hyperledger only. We also actively cooperate with Ethereum Foundation, and intend to use Ethereum technology in our work. It’s not some sort of internal competition, we’re well aware of pros and cons of each platform, and we have a strategy for their application in various projects.

FL: The cryptocommunity often says that banks are going to lose their battle with blockchain. What do you think about it?

Pavel Khodalev: Bank is your partner in the first place. It facilitates many operations in finance. Yes, a change of technologies would alter some functions, yet it creates new needs that always are a projection of the need to minimize risks that the technology cannot tackle, address, or creates. Blockchain is a technological foundation for building of new interactions that will similarly contain risks. Therefore, banks have every chance to become the player that would take those new kinds of risks.
Blockchain is most likely to become the substrate of a new banking. Those banks that successfully accept today’s challenges and transform in time will only win from using blockchain. We’re on the threshold of dramatic changes in our world and economy. Universal application of AI and robots would result in a hybrid economy of people and machines which would desperately need blockchain as a basis for control, audit and arbitration.

FL: Do you own any cryptocurrency? Bitcoin, maybe? What do you think about cryptocurrencies in general?

Pavel Khodalev: I once held an e-wallet with bitcoins inside in my hands. However, jokes apart, bitcoin is in two parts: it’s both means of payment and means of investment.

I’m not personally interested in it as means of payment for I have no tasks it could cover. As for the investment part, my experience in technologies and global capital business market has some influence. This experience grants me the understanding of unpredictability and volatility of non-backed financial tools. Investing in such tools is like a game of roulette I’m not actually interested in.

FL: What do you think about the idea of creating a national cryptocurrency? Is it a promising area?

Pavel Khodalev: There were some ideas at Finnopolis 2016 in Kazan this October; they concerned a law on cryptocurrencies that would at least define the term and legitimize it within the country’s legal realm.

National cryptocurrency would allow us to use blockchain technology in some operations, and would become an incentive and a catalyst for development of financial services of the next generation. Therefore, all circumspect government initiatives are only welcome.

Nation states and economies spend enormous money on supporting and maintaining huge amounts of cash. I don’t know the exact numbers for Russia, however, according to Western analysts, these expenses may reach 1.5% of their economy’s GDP. So, apart from technological breakthrough, there’s also an economic one. A national cryptocurrency is an additional incentive to create a cashless world.