Russia’s ICO a success, but legal obstacles remain

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Russia’s initial coin offering (ICO) pilot has ended, and according to its administrator, the Bank of Russia, it has been a complete success. While everything went according to plan, the country’s central bank added that there are still a number of legal issues that need to be addressed before Russia can offer a state-backed cryptocurrency.

Ivan Semagin, Bank of Russia’s deputy director of financial markets development, announced the results during the recent Eastern Economic Forum in Vladivostok. He said that the bank’s ICO experiment, which was originally announced in May, performed as had been expected, but that it was now time to address certain legal obstacles. He said, “In the framework of Bank of Russia’s ‘sandbox,’ an experiment was recently carried out to conduct an ICO…technically everything went well, but there were a lot of issues from a legal point of view.”

Semagin didn’t elaborate on what the legal issues that need to be addressed were; however, it isn’t difficult to surmise that there are a number of caveats in the legal framework of the country that specifically refer to rubles, and possibly internationally recognized currencies, as being the only legal tender allowed the country.

The project was conducted through a partnership between the central bank, the largest retail bank in the country, Sberbank and Russia’s National Settlement Depository (NSD). It was designed to test the launch of an ICO on a platform that was managed by a central bank and is part of a larger sandbox that is encouraging other projects for various financial products and services in an environment that is not limited by government regulations.

The NSD, using the same technology employed by the country’s stock exchanges, registered, transacted and settled all of the tokens. The depository acted as the custodian, while Sberbank CIB, the investment subsidiary of Sberbank, served as the chief investor in the ICO of Level One, a commercial lecture website based in Moscow.

According to Sberbank CIB CEO Igor Bulantseve, speaking earlier this year on blockchain investments, “Sberbank CIB considers the Russian ICO market to be very promising. Many Sberbank clients are interested in this type of investment, and we plan to promote this service proactively once the appropriate legislative framework comes into effect; we will be one of the drivers to institutionalize and popularize this type of transaction.”

The subject of a state-backed cryptocurrency is a hot-button topic in the crypto community. The whole reason digital currency was created was to be able to offer a peer-to-peer currency that provided a certain level of anonymity. A coin introduced by a government will not be peer-to-peer and will certainly not allow anonymity.