Sberbank first announced in August 2020 its intention to issue a stablecoin tied to the Russian ruble. The new payment instrument named Sbercoin was initially intended for acquiring various digital financial assets (DFA).
At the end of 2020 the stablecoin underwent testing, and in January 2021 Sberbanksubmitted an application for its registration with the Central Bank of Russia.
ForkLog spoke with experts about the functions of this solution and its prospects for use.
Are stablecoins legal in Russia at all?
The law “On Digital Financial Assets,” which took effect on January 1, 2021, permits the issuance of DFA by all platforms registered as issuers. If the Central Bank of Russia approves the application, Sber’s blockchain platform will enter this category.
As early as November 2020, Herman Gref spoke about the development of Sberbank’s blockchain platform. On it clients would be able to acquire not only DFAs but also various “green” instruments.
Green financing instruments include green loans, green bonds, green banks and green funds. They are funded by money provided on condition of environmental improvement, mitigation of climate change impacts and more efficient use of resources.
In the traditional sense stablecoins have a fixed exchange rate or are resilient to significant fluctuations.
The Law on DFAs classifies stablecoins as digital financial assets. Essentially they are securities issued on a blockchain. They can be pledged as collateral, exchanged, bought and sold.
What’s in it for Sber?
Sbercoin is conceived as a native settlement instrument of Sber’s blockchain platform. It is intended to be used in smart contracts and to pay for digital assets issued on the platform, ForkLog was told by the bank’s press office.
There is no issuance of Sbercoin per se – the token represents rubles credited to clients’ accounts.
“The smart contract automatically executes a payment to one of the parties to the contract when certain conditions are met. On the blockchain platform these payments are represented by the token: a record with a unique number, denominated in rubles,” the bank explained.
Because Sber’s platform is integrated with banking systems, ruble payments on clients’ accounts are processed automatically and correspond to payments in tokens.
The settlement token also has the properties of a unique code, by which one can track the movement of funds for oversight. Additional attributes will enable restrictions on how the tokens can be spent.
Under the plan, clients store the stablecoin in wallets and authorize transactions with electronic signatures with keys on hardware tokens. It can be obtained in a wallet on the blockchain platform by transferring rubles from their account.
Listing Sbercoin on any exchanges is not planned.
To ensure security of the payment instrument, developers use an enhanced qualified electronic signature (UKEP) on cryptographic tokens.
The electronic signature UKEP is analogous to a handwritten signature, but for stronger protection includes information about the time of creation of the signature (TSP) and about the status of the signature certificate (OCSP) at signing (valid or revoked). It is impossible to forge UKEP.
Sbercoin has undergone testing in smart contracts for the sale of S7 airline tickets and renewable energy certificates (REC).
The registration procedure for the blockchain platform to issue Sbercoin takes 45 days. If the Central Bank approves the project, the token could launch as early as spring 2021. Otherwise the regulator will list remarks that will need to be corrected.
What are the prospects for Sbercoin?
A stablecoin issued by a single bank will never achieve broad market penetration, because other banks will not want to interact with a competitor’s token, says Grigory Klumov, founder of the stablecoins platform Stasis. Essentially, the buyer of Sbercoin provides short-term liquidity to the issuer Sberbank. No other bank would use this, he argues.
“For a stablecoin to gain significant traction in the market, it should be issued by an independent company that does not have a fixed priority or a single major counterparty or partner. Therefore Sbercoin will be a toy available only within Sberbank’s ecosystem,” Klumov argues.
In this context it is easier for Sber to use centralized settlement accounts without extra costs to maintain a decentralized infrastructure, adds the expert.
In the West such ambitions were demonstrated by JPMorgan, which in late 2020 revived the JPM Coin project to address interbank payment issues.
From Sbercoin’s side it looks like an attempt to blend loyalty points, in this case “Spasibo,” with a smart contract, continues Andrey Tugarin, managing partner at GMT Legal.
“Linking Sbercoin to the ruble can be seen as an attempt to copy Tether, but with restrictions on further use. How this will differ for users in Russia from loyalty points remains unclear,” notes he.
This is also tied to the issue of rising customer interest in the new instrument:
“Essentially, it’s the same audience as for ‘Spasibo’. There is no acute need for a token.”
Experts are not rushing to discuss whether native tokens will become a new stage in the development of financial institutions, as with payment cards, due to too low mass adoption. However such initiatives will undoubtedly influence the Russian cryptocurrency market:
“In Russia the cryptocurrency market is very small, so any ‘Sbercoins’ and other DFA will undoubtedly increase interest in cryptocurrency,” Tugarin suspects.
Before Sbercoin hits the market, the bank will need to determine what rights the new instrument will grant to customers. For example, will holders be able to exchange the stablecoin back into rubles or will they earn interest on deposited funds.
Regulatory obstacles could hinder Sber’s plans to launch the new instrument, especially given the lack of enforcement practice.
“In Russia the ruble remains the sole means of payment. Its digitization can only be implemented by the central bank, which has teased the community with the ‘creation of a digital ruble’, but this remains only plans,” Tugarin notes.
In December 2019 the Bank of Russia’s regulatory sandbox tested ruble-backed stablecoins developed by local companies.
A year later, in December 2020, the regulator spoke out against issuing stablecoins pegged to the ruble, noting that developers of smart contracts in Russia should use as the crypto asset the digital ruble created by the central bank.
The regulator’s hard stance on the one hand creates an obstacle to Sbercoin’s entry into national interbank settlements. However, given Sber’s developed ecosystem, it could well pose a serious competition to the digital ruble, experts conclude.
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