The biggest Russian bank has announced that it will create its own blockchain and it will incorporate it with Ethereum to expand into DeFi and Web3 markets. The Russian government plans to create its own crypto exchange.
Sber (formerly known as Sberbank) officially announced new opportunities on its proprietary blockchain platform. This includes compatibility with smart contracts and applications on Ethereum. The bank stated that this would enable developers to transfer smart contracts and entire projects between Sber’s blockchain and other public blockchain networks.
Sber’s latest additions include integration with MetaMask, a major software cryptocurrency wallet that interacts with the Ethereum blockchain. According to the announcement, users can now make transactions with tokens and smart contracts placed on Sber’s blockchain platform.
Alexander Nam, head of the blockchain lab, said that “Sber Blockchain Lab collaborates closely with external developers. I am happy that our community will now be able to run DeFi apps on Sber’s infrastructure.” The new integrated features will allow Sber to bring together developers, financial institutions, and corporations to explore the practical applications of blockchain, Web3 and decentralized finance (DeFi).
Sberbank, as previously reported, has been actively developing blockchain products in recent years, submitting an application to the Bank of Russia in order to launch a platform on blockchain for its “Sbercoin” stablecoin in 2021. Sber finally announced its first digital currency transaction after receiving approval from the central bank in spring 2022. The government of Russia is Sber’s majority shareholder, owning 50% + 1 share.
Sber’s announcement was made shortly after Russian President Vladimir Putin demanded an open, blockchain-based settlement network. He condemned the monopoly of global financial payments systems and expressed confidence that digital currencies-based technology would allow for greater independence from banks. Putin’s government, however, does not allow citizens to use crypto for payment. In early 2020, it imposed a blanket ban against payments using Bitcoin.
Russian lawmakers discussed possible legal amendments to enable the government to launch a national cryptocurrency exchange. The Bank of Russia and the Ministry of Finance support this effort, which is known for being a source of much disagreement in regulating the local crypto market.
Russia wants to launch its own crypto exchange
Russian lawmakers are currently working on amendments that would allow for the launch of a national cryptocurrency exchange. The effort is supported by both the Ministry of Finance as well as the Central Bank of Russia.
Local media reported that members of Russia’s lower chamber, the Duma, have been meeting with market participants to discuss amendments to its existing cryptocurrency legislation “On digital financial assets.” First, the amendments that would establish a legal framework to allow for a national currency exchange will be presented to the central bank.
Sergey Altuhov was a member of the Committee of Economic Policy of Duma, and he highlighted the fiscal sensibility of these measures:
“It makes no sense to deny the existence of cryptocurrencies, the problem is they circulate in a large stream outside of state regulation. These are billions of tax rubles of lost tax revenues to the federal budget.”
In June 2022, Anatoly Aksakov (head of Duma’s Committee on Financial Market), suggested a Russian national crypto exchange could be launched under the Moscow Exchange, as this is seen as a “respectable organization with a long tradition.” In September, the Moscow Exchange created a bill on behalf of the central bank to allow the trading of digital financial assets.
A bill that would allow cryptocurrency mining and the sale of cryptocurrency mined was presented to Duma earlier this month. Although the bill will create a Russian platform to sell cryptocurrency, local miners can also use foreign platforms. The Russian regulations and currency controls would not apply to transactions in this case. However, they would need to be reported to Russia’s tax service.
Many popular crypto exchanges have stopped operating in Russia. However, some platforms continue to serve the region.
Nine months after the conflict between Russia and Ukraine, sanctions against Russia have grown at an aggressive rate. The European Union legislators announced that they would ban all cross-border crypto payments between Russia’s citizens and Russia.
The EU has initiated a ban on all “crypto asset wallets and accounts” in response to Russia’s continued annexes of Ukrainian land, its repeated mobilization of troops in the country, and threats of nuclear escalation.
In previous sanctions, cryptocurrency payments between Russian and EU wallets were limited to 10,000 euros. This new ban will deprive Russia of its military power and limit its industrial components.
Crypto exchanges apply bans on Russian crypto users
A number of popular cryptocurrency exchanges in the region, including LocalBitcoins and Crypto.com, sent emails to customers advising them to withdraw funds immediately to avoid being unable to use their services.
It’s worth noting that in September 2022, LocalBitcoins was responsible for 8% of Russia’s crypto trade volume. This makes them the largest client base on the exchange. Additionally, Russian users were responsible for facilitating 20% of all BTC trading volumes before the ban.
Binance, the largest cryptocurrency exchange in the world, is working to implement the new restrictions. A representative of the firm said that the changes could take time and would not be live until a set date.
Bitfinex, an exchange that had opposed the increasing sanctions being imposed against Russian citizens, has recently changed its mind, saying that it may need to modify its policies if directed by the regulatory authorities.
Another ban faced by Russian citizens comes from Dapper Labs, who banned them from accessing the popular blockchain earlier this month. Users from this side of the globe will not be able to access the popular NFT marketplace, along with several other crypto products.
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The ban’s impact
It’s no surprise to anyone that most Russians can’t rely on their bank accounts anymore, and crypto provides a safe haven to guard their savings or receive money from abroad. The hard fact is that digital assets can be used to help citizens in war zones. And it’s the same with Ukraine, which has received billions in crypto donations.
This last ban will cause pain to some Russian financial institutions and retail outlets. The fact that BTC saw a sharp increase in price during the conflict is something that the EU is much aware of. The European Authorities noticed this loophole in their strategy of suffocating Russia, and it’s also trying to sanction this.
However, these sanctions will be enforced through the EU’s Financial Action Task Force, and they can potentially redefine the region’s crypto landscape in the near future.
What happens to Ruble pairs that are held by these exchanges
The regulators have been strict with exchanges that allow blacklisted citizens to trade on their platforms in the past. This leads to the question: What will large volumes of Rubles trading pairs do when dealing with these assets?
Nobody gave any indication of what exchanges should do, and they will be prudent this time. Now, the exchanges have no choice but to make major losses on their balances. The ban will put decentralized finance (DeFi) back in the spotlight because it provides a censorship-resistant and easily accessible infrastructure to people living in geopolitical turmoil. However, we’re already seeing censorship on the new PoS Ethereum blockchain.
It is unclear if exchanges will have to return funds to Russian users or block access to their accounts. This is something that each exchange will have to resolve on its own.
Despite the ban, many exchanges are still functional
Binance is considering restricting its services to Russian users. However, Binance is operating as usual. The United States-based exchange Kraken, which is based in the United States, has not placed any restrictions on Russian customers, and there are no indications as to whether it will voluntarily comply with EU requirements.
Antigua and Barbuda’s FTX is another popular exchange that has not been subject to any kind of ban. Garantex, a popular Russian cryptocurrency platform, has not been banned. It still offers traders in the region a variety of advanced services like futures and derivatives.
Other popular platforms operating in the region include Seychelles-registered Huobi Global, OKX, KuCoin, and Mexc Global. Bybit, a Singapore-registered cryptocurrency exchange, stated that it would continue to adhere to its ethos and support transparency, freedom and decentralization. It will not impose sanctions on Russian clients. Many of these clients may not agree with the war or the stance of their leaders.
Last but not least, Exmo, a crypto exchange based in the United Kingdom, has sold its Russian business earlier this year to a local vendor. Its Exmo.me domain still allows the platform to operate in Russia and the neighboring countries of Belarus and Kazakhstan.
As the war between Russia and Ukraine continues, it will be fascinating to see how crypto companies operating in the region adapt and adjust to changing geopolitical realities.