Russia and China May Digitize Their Currencies With Ethereum

An increasing number of central banks and governments are working on digitizing their national currencies. China and Russia are investigating the potential of Ethereum as the base protocol for a digital Yuan and Ruble respectively.

Currently, the Royal Chinese Mint, the subordinate unit of China Banknote Printing and Minting, is testing Ethereum and its ERC 20 token standard to digitize the renminbi (RMB) or the Chinese yuan. As ConsenSys’ head of global business development Andrew Keys revealed in his blog post, the Royal Chinese Mint is at the forefront of research and exploration into digital money.

By utilizing the ERC 20 token standard, the Royal Chinese Mint is essentially considering the possibility of releasing unique tokens that are compatible with the Ethereum network; an Ethereum-compatible token would grant higher liquidity and interoperability.

The Royal Chinese Mint is currently “concentrating on the research and exploration of the forefront of digital money, taking part widely in innovation and practice in the fields such as digital currency, mobile finance, smart-city construction and Internet-based finance; it also actively promotes the application of blockchain technology in finance and related fields,” wrote Keys.

Apart from the Chinese government, Russia is also looking into Ethereum and its potential in the finance sector. Although technical specifications and details of the Russian central bank’s national digital currency project remains undisclosed, in 2016, the Bank of Russia announced the development of an Ethereum-based interbank blockchain prototype called Masterchain. Some of the largest commercial banks in Russia participated in the pilot test, and the Bank of Russia’s Deputy Governor recently expressed her optimism toward cryptocurrency.

“Regulators of all countries agree that it’s time to develop national cryptocurrencies, this is the future. Every country will decide on specific time frames. After our pilot projects, we will understand what system we could use in our case for our national currency,” said Olga Skorobogatova at the St. Petersburg International Economic Forum 2017, held over June 1-3.

In early 2017, Ethereum co-founder Vitalik Buterin revealed that a part of the vision of the Enterprise Ethereum Alliance (EEA) is to provide an infrastructure for large-scale commercial companies. As Ethereum evolves into a more flexible and functional network, it would allow central banks such as the People’s Bank of China (PBoC) and Bank of Russia to consider the actual possibility of building serious applications and even national digital currencies on top of the Ethereum protocol.

As Bloomberg reported, Putin highlighted the potential for blockchain technology to build new business models at the St. Petersburg event, “The digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models.” Leonid Bershidsky, founding editor of Vedomosti, said that the shift toward Ethereum is part of a drive to capture a competitive advantage ahead of the West, China and Japan, diversifying Russia’s economy away from oil.

It is important to note that the PBoC and its officials have stated that Ethereum is going in the right direction in terms of vision and strategy. The PBoC is also enthusiastic toward the ICO market and intends to regulate the market in the near future.

While expressing his optimistic towards the development of Ethereum, ​Yao Qian, Deputy Director of the Science and Technology Department at the People’s Bank of China, stated:

“You can open a real intelligent business application. Because of this, smart contract technology is in rapid development.”