Dmitry Plakhov: Banks deny cryptocurrencies because of the anarchist statements of crypto-enthusiasts
Why don’t banks want to cooperate with cryptocurrencies, why is the Libra project dangerous and what is wrong with the Russian crypto-business? That’s what in an interview for LetKnow.News said the chairman of the association "Blockchain developers community in St. Petersburg" Dmitry Plakhov.
- Tell us about your background, what were the most interesting blockchain projects you have worked with?
- In our blockchain developer community in St. Petersburg, which I have headed since 2017, we are creating decentralised applications and various blockchain solutions for corporations. However, those solutions are not on the basis of public distributed registries, such as Bitcoin and
Ethereum, but based on corporate blockchains of private networks, such as Hyperledger Fabric. We create a trusted environment between organisations and counterparts that can interact without bureaucracy and without excessive paperwork.
When there are such bottlenecks as workflow, or bookkeeping and mutual settlements, thanks to the blockchain, they can be improved, accelerated and the company's expenses for these interactions reduced.
crypto-anarchism, we are not supporters of this idea - we are not trying to exclude the influence of corporations and banks on the economic system. Perhaps in some historical perspective, society will be able to interact without intermediaries in the face of banks and corporations, but in the coming years we will work for companies, and we will continue to use banking services and products. Therefore, now we are trying to be synchronised with modern technologies and are doing blockchain applications that are used in banks and in large Russian companies.
If we talk about my experience, then I am over 20 years in the IT industry. In recent years, I led the development of OpenStack at Sberbank-Technology, then moved to the blockchain-lab of Sberbank.
Thanks to my experience in the financial sector, I was able to sort out a number of banking products and propose solutions for their digitalisation and transfer to the blockchain. Since last fall I have been working in the Russian company OTsRV, which has been set up with ambitious tasks in the digitalisation of the railway industry. I oversee the production and research laboratory of the blockchain, that managed to the develope a Russian platform for mutual settlements and mutual control between subsidiaries of Russian Railways and other counterparts.
We also submitted our competencies to the Center for Distributed Registers Technology at St. Petersburg State University, where I head the Technical Committee. The Center developed a tool for analysing blockchain platforms. The system automatically collects and processes information on 20 platform repositories of distributed registries, which are used to create applications on the blockchain. Analytical information will be regularly published on the website of the Center.
I want to emphasise once again that it is important not only to work on the practical implementation of the blockchain technology in companies, but also to conduct research work that lays the foundation for further developments.
- How does the situation on the crypto-market affect the development of blockchain technology?
- It is necessary to separate the concepts of blockchain and cryptocurrency. Blockchain is a technology that has the property of a distributed registry and consensus, the historical continuality of the data and, in certain cases, the reward of the miner for his work. Cryptocurrencies can also be centralised without any DLT technology.
The topic of cryptocurrency, however, developed from that small feature of the blockchain, when a person is rewarded for maintaining the network’s performance, which is why
mining has become the driver for creating cryptocurrencies and a marketing tool for spreading technology around the world.
Many have already experienced some fraudulent cryptocurrency schemes. After all that chaos and disgrace, a clearer understanding of the economic process of cryptocurrency appeared, and we already understand what needs to be done in the future to eliminate fraudulent schemes and interactions.
That is why we study all the platforms that exist today. Of course, we give preference to Bitcoin, Ethereum, Hyperledger Fabric, which we are using as a base platform - those are all Open Source projects, where the community of developers and users can always figure out which functions and which code is hidden in the product.
This allows most process participants to check the status of the network. It should be understood that the blockchain is a story about community and partnership, because you cannot be a member of a blockchain platform, being isolated and secretive, creating some secret solutions and not trusting others.
- Why is the banking sector more friendly to blockchain, but it looks at cryptocurrencies with apprehension?
- I think the fact is that the community of crypto traders, developers of various cryptocurrency
token platforms have put themselves in opposition to the current financial system, trying to resist the established tradition and algorithms of banks. That is why banks deny cryptocurrencies.
Of course, banks, having licenses and good positioning with governments, cannot accept the fact that the world cryptocurrencies dictates to them - to be volatile and uncontrollable. Crypto assets are not controlled by states, governments, or any international agreements or exchanges. It is impossible to determine which organisations or individuals are behind the most popular cryptocurrencies.
But again, it is worth separating the technology of blockchain and cryptocurrencies. As for the introduction of the blockchain technology, here the banks are one of the pioneers and the most active participants. After all, the technology itself provides banks with an advantage. There is, for example, a wonderful solution for interbank interaction - SWIFT. The system is excellent, but it is centralised and connects banks to the ecosystem under certain conditions, and the banks charge some of their own fees for SWIFT transfer services. But despite these advantages, there are still some delays, even in such payments. When there will be a solution on the blockchain as SWIFT, which will make all transactions instant and transparent, and at the same time they will not cost the bank huge money, then such a solution will instantly win the favour of banks around the world. There is already IBM Wire, Hyperledger Fabric, Stellar, which already provides this technology.
- What is the role of blockchain and bitcoin in payment systems?
–At the moment, the role of cryptocurrencies in payment systems is absolutely negative and criminal. It goes without saying, that any payment in any state must be controlled. The organisation that emits money in any country is the central bank. And it is that establishment that is the owner of the money, bonds and other coins.
At the same time, bitcoin payments are not tracked by any controlling authority, while there are practically no legal schemes for withdrawing cryptocurrency to fiat, coordinated with regulatory authorities.
Of course, for cross-border payments, bitcoin transfers are cheaper than traditional bank transfers. But, if you want to use the grey scheme, you will stuck with those bitcoins and you can’t do anything with them, since they are in the illegal zone, and thus are in fact an infringer. Only in some countries one way or another payments using Bitcoin are allowed, but even there one must first go through the KYC / AML procedures.
- How will the market of payment systems change with the launch of Libra and TON?
- The solution that sooner or later the whole world will agree on is a single platform that takes into account the interests of all players from different sectors of the market. It seems to me that for each case there will be some kind of platform of its own. I admit that cryptocurrency or blockchain solutions for social networks is basically an interesting task. But such a solution has already been created. We all know that there was a project Steem and its Russian replication Golos, where the topic of earnings in the social network was disclosed.
I find it difficult to say what exactly are the new things that Facebook bring in to this topic. Since Steem is a decentralised system, where each participant can host a node and view transactions transparency. That is an ideologically correct blockchain solution. Facebook also offers a centralised solution, where it will be the owner of all the nodes. One gets the feeling that this is another bonus system, such as some mall’s discount cards or airline’s miles. Actually, those also may be called a kind of cryptocurrency, because we do not receive real money from Aeroflot - but some units instead, that we can use in its bonus program. I think Libra will work in the same way.
Of course, if Facebook becomes a payment operator for online stores on the social network, then the bonus system will make sense. But few will trust it, because data of the social network users are already given to that organisation, which very much controls us and analyses our behaviour, controls desires. And if it is also tied to a monetary
exchange, we will fall into some kind of bondage from Facebook. I am actually expressing not only my opinion, but the opinion of a large number of people who care about personal security and freedom. The way Libra has been intended so far, makes is unsafe, and rather causes distrust and unwillingness to use this system.
- How favourable are the conditions for the development of a crypto market in the Russian Federation?
- They are unfavourable. I have not seen any approval yet, no happy faces of the regulatory authorities when they hear anything about “cryptocurrencies” and “blockchain”. Of course, we haven’t received any help from the state and permits in this area.
But work in this direction is underway, I myself participated in government meetings and still remain in the expert council on the blockchain and cryptocurrency in the State Duma of the Russian Federation. It seems to me that everything is slowly moving on. Lawmakers have so many questions about blockchain and cryptocurrency turnover in Russia. Indeed, it is probably difficult to find some tools for taxing such things, which is most likely why these laws are not being adopted. Moreover, it is hard to guess what role this law will play - it will be for the good or close the last development opportunity for cryptocurrency business in Russia and cut off the whole sector of the economy.
- What transformations should the crypto industry go through in order to gain the status of a mature market?
- It all depends on the regulation, and not only in every single country, but in the world as a whole. Anyway, we must understand that not all players can play by the same rules, since then we would have had one country with the same constitution. It is necessary to understand that everyone has a different past, different cultures, different ambitions. I think that this is a utopia, that the globe will be covered by one network of certain nodes and configurations. But I admit that there can be a single platform for interaction between players of a certain sector, for example, insurance or logistics companies.
However, the distance between the rails in Russia is slightly larger than the distance between the rails in the whole of Europe. And each has its own standards. We will have same story with blockchain system. It will take us a long to get to some single standard.