After long and careful consideration, R3CEV, better known as the R3 consortium, also simply called R3, reportedly denied the application of Russia’s Largest Bank, Sberbank, to join the rest of the banks in the consortium due to international sanctions against Russia.
Since the introduction of Bitcoin and the concept of blockchain technology in 2009, the blockchain has represented the following attributes: decentralization, transparency, immutability and security.
Perceiving the success of Bitcoin and other legitimate cryptocurrencies and blockchain projects such as Monero, Litecoin and Ethereum as a threat to global banking and finance, banks entered the realm of blockchain technology and began to develop blockchain-based platforms for cross-bank settlement of payments.
For the public, as well as the cryptocurrency community, the description of blockchain provided by banks and financial institutions came off as nothing more than a strategic combination of jargons. Consortia such as R3 offered ambiguous statements such as “distributed ledger is not blockchain, blockchain technology is only a part of a larger technology in DLT” and ultimately, hindered their own vision of what they thought was truly the international framework which banks and financial institutions with centralized infrastructures can rely on.
However, as obvious it may seem, a decentralized infrastructure is not compatible with a centralized platform. Therefore, consortia like R3 eliminated its brand image of a blockchain consortium and moved on to the development of a more applicable version of blockchain. So-called DLT, consortia began to develop a blockchain-inspired technology.
Some banks like Goldman Sachs, Santander, Morgan Stanley and the National Australian Bank did not agree with the vision of R3 to launch blockchain-inspired technology in R3 Corda which ultimately is a non-blockchain-based platform. Considering R3’s demand for a $150 million funding round to continue operations for the year and for the foreseeable future, the four banks jumped off the bandwagon of DLT.
Still, some banks wanted in. One of these banks was Russia’s largest financial institution in Sberbank. But, contrary to the principles of the blockchain, which is to offer a decentralized, secure, immutable and transparent platform, R3 firmly declined Sberbank’s application with the reason being sanctions of the US against Russia.
According to the leading Russian publication Kommersant, only one fintech company called Kiwi received the invitation to join the R3 consortium to build a blockchain-inspired technology which could better suit banks and financial institutions in a wide range of applications.
The ambiguity of the denial of Sberbank did not end with R3’s decline of the bank’s application. Since late 2016, Russia’s Sberbank expressed its dedication to the development of blockchain technology and as a result, hoped to join the R3 consortium. However, in a blog post released on February 24, R3CEV CEO David Rutter stated that R3 never planned to utilize blockchain technology.
“While we were almost certainly guilty of slipping into this semantics trap now and again, we’ve said from the beginning that Corda is a distributed ledger platform, not a traditional blockchain platform. It was never designed to be one.”
Of course, this was also proven to be wrong as it was later revealed that R3CEV referred themselves as a blockchain consortium building a blockchain platform on several occasions, most notably on their social media accounts. The image provided by economist and bitcoin researcher Saifedean Ammous showed.
Then, the question became, why is Sberbank still trying to enter the R3 consortium if R3CEV executives have reaffirmed that the consortium and its banks are not focused on building blockchain technology and Sberbank is dedicated in demonstrating the potential of blockchain technology?
It is likely that Sberbank is testing the potential of blockchain technology and other blockchain-inspired technologies that could impact global banking as a whole. R3’s decision to leave blockchain and to work on a more suitable technology that demonstrates better applicability for current banking operations could turn out to be a realistic and smart business decision. However, if Sberbank wants to remain in the realm of blockchain, a more appropriate approach would be to set its focus on building blockchain products.
Featured image from Shutterstock.
Last modified: March 4, 2021 4:55 PM