The Federal Assembly of Russia State Duma, the Ministry of Finance and the Federal Financial Monitoring Service, known as Rosfinmonitoring, are set to review a proposal drafted by the Association of Financial Innovation (AFI) regarding regulatory improvements to the National Payment System.
One of the main provisions of the proposal was a roadmap that entailed the utilization of Blockchain technology to create an immutable and transparent client identification system. In essence, the Russian government is cautiously planning the usage of Blockchain to identify clients of the National Payment System.
PlusWorld, a Russian publication, reported:
“Along with expansion opportunities in the short term transactions under the simplified identification of clients, develop an approach and implement a single identifier (possibly using Blockchain technology).”
Potential merits and disadvantages of Blockchain
For the government of Russia, several benefits may arise when using a Blockchain-based identification system as the basis of the National Payment System. One major benefit is the ability of Blockchain to securely store data within a transparent ecosystem.
Because Blockchain enables the secure transfer of data and real-time broadcasting of the information to everyone within the network, the government can identify users even in the midst of identification updates.
In addition, the immutable and decentralized nature of Blockchain prevents potential cases of hacking attacks or data breaches, which may lead to significant alterations to the database of the government that could highly likely manipulate crucial financial and personal data.
Issues and conflicts in the implementation process
Like any other monetary or financial system, the government will most likely create an authentication platform that grants a certain level of control to the government and local authorities.
However, it is virtually impossible to create an immutable system with different levels of authority within a single network as that eliminates the advantages of a decentralized network.
In other words, a Blockchain cannot be centralized due to serious security consequences.
Although the roadmap and vision of the Russian government are both clear based on the report of local publications, it is important for the government to consider difficulties that may arise in both the implementation and deployment processes.
Large cryptographic networks like Ethereum have struggled to deal with external attacks even with the presence of an open source community. Thus, such a system will require assistance from a consortium or the formation of an experienced development team to lead the development phase.