Blockchains Are Now Weapons For Nation-States, Whether We Like It Or Not
Blockchain technology, once considered niche and limited to the realm of cryptocurrency and “Bored Apes”, has now emerged as a powerful tool with the potential to shape the global landscape. Nations around the world are recognizing its transformative capabilities and are actively exploring its applications in various sectors. Encryption can be traced back to its use in ancient Egypt, Greek, and Roman military culture, to the World Wars and the creation of the first computer, to finally arrive at its modern use in the era of the World Wide Web.
Cryptography is the science or study of techniques of secret writing and hiding messages in any medium. Encryption is only one component of cryptography, in which an original plaintext or data is transformed into a ciphertext that prevents malicious third parties from understanding its content. Blockchain technology uses various encryption methods to keep data secure, private, and immutable. The encryption methods used include hash functions and blockchain asymmetric encryption – each forming part of the security puzzle. Russia and China have both made significant strides in harnessing the power of blockchain technology. From state-backed cryptocurrencies to initiatives aimed at internationalization, we explore their strategies, motivations, and potential implications for the Free World.
Russia and China are leading the way in using blockchain technology as a weapon for nation-states. Russia has reportedly developed a cryptocurrency called CryptoRuble, which is backed by the Russian government and can be used to store and transfer value. This currency is designed to be an alternative to U.S. dollar-backed currencies like USDC, making it easier for Russia to bypass US economic sanctions. China has also launched various initiatives aimed at internationalizing its national currency, the yuan. These initiatives include the establishment of a blockchain-based digital yuan and the development of blockchain applications for international trade finance and cross-border payments.
In addition to the uses of blockchain technology for strategic objectives, Russia and China have also been exploring its potential use in other areas. Moreover, both countries are also looking into ways to use blockchain technology for various applications such as healthcare, supply chain management, and smart contracts. In August 2018, China launched a blockchain-based system called “Blockchain-Based Service Network” (BSN) which allows developers to build applications on top of existing blockchains such as Ethereum or Hyperledger Fabric. Both nations are hoping that these measures will help them gain greater control over their economic influence within global markets.
Russia's Blockchain Revolution:
Russia, a country known for its complex relationship with crypto, has undergone a significant shift in its stance toward blockchain technology. This move signifies a new era of acceptance and recognition of the potential benefits of blockchain technology in the country. Russia aims to be at the forefront of blockchain innovation and establish itself as a global leader in the field. Beyond the realm of cryptocurrencies, the Russian government is actively exploring the potential of blockchain applications in various sectors. The government's support for the development and adoption of blockchain-based applications is a testament to its commitment to fostering innovation and driving economic growth despite its invasion of Ukraine and the subsequent economic sanctions by the West.
One area where Russia sees immense potential for blockchain technology is in governance and public services. By exploring digital voting systems and digital document management, the government aims to increase transparency, improve efficiency, and enhance citizen participation. Blockchain's inherent properties of immutability and transparency can ensure the integrity of voting systems and enable secure storage and verification of important documents. Russia's foray into blockchain governance is a testament to its recognition of the technology's potential to revolutionize traditional systems.
Russia has also been making strides in the internationalization of blockchain technology. In 2019, the country launched a blockchain-based platform called “Global Digital Assets” (GDA) which allows users to store and trade digital assets in different countries. This platform is part of the country's efforts to create a global digital economy that is borderless and accessible to all. The GDA platform has been integrated with major banks and financial institutions in Russia, allowing users to trade digital assets with ease.
One of the latest developments in this space is the plan by the Russian Cryptoeconomics Association (RCA) to open representative offices in Africa. This move is significant for several reasons, as it demonstrates Russia's growing interest in digital assets and highlights the potential for blockchain to drive economic growth in emerging markets. The RCA is a non-profit organization that promotes the development of the digital asset industry in Russia. It was founded in 2018 and has since become a leading voice in the country's blockchain community. The decision to expand its operations to Africa reflects the RCA's commitment to global outreach and its recognition of the continent's potential as a key market for digital assets.
Russia has also signed several agreements with countries such as Belarus and Armenia to collaborate on blockchain projects. These agreements are aimed at creating an infrastructure for cross-border payments and boosting economic growth in the region. With these initiatives, Russia is hoping to establish itself as a hub for blockchain innovation and attract investments from around the world. Cooperation between Iran and Russia on blockchain and crypto has the potential to strengthen their trade relations and help both countries overcome the challenges posed by economic sanctions.
In 2018, Iran and the Russian Federation signed a memorandum of understanding aimed at increasing cooperation in the field of information technology, including blockchain and crypto. Since then, both countries have taken steps to strengthen their cooperation on blockchain and crypto. In 2020, the Russian government announced plans to establish a blockchain research center in Iran, aimed at promoting the development of blockchain technology in the country. Iran has also taken steps to strengthen its cooperation with Russia on crypto, with the country's central bank announcing plans to use Russia's blockchain platform to conduct interbank transactions.
Abbas Ashtiani, CEO of the Iran Blockchain Association; Alexander Brazhnikov, executive director of the Russian Cryptocurrency and Blockchain Industries Association (August 02, 2022)
The Russian Federation is considering the creation of a stablecoin backed by gold that can be employed for cross-border settlements, including with Iran, the chairman of the Financial Market Committee at the lower house of the Russian parliament, Anatoly Aksakov, told the Parlamentskaya Gazeta newspaper. Such a stablecoin can then be used as a means of payment, in mutual settlements between Russia and Iran for example, Aksakov elaborated, also quoted by the state-owned Interfax news agency. He added that the proposal has been received with interest from the Iranian side.
Iran and Russia are not the only countries exploring the potential of digital assets in strengthening their trade relations. The governments of Russia and Cuba are also considering using cryptocurrencies to facilitate bilateral cooperation amid the sanctions imposed on both nations. The news comes from a statement by Boris Titov, commissioner for entrepreneurial rights to the Russian president, who visited Havana. The Russian business ombudsman arrived in the Cuban capital on the occasion of the 38th edition of the Havana International Fair. “We are all, Cuba and Russia, under sanctions, the dollar turnover is the main financial mechanism that exists in the world for mutual settlements, but today mechanisms are developed at the level of national governments to change the situation“, said Titov to the Russian state-owned Tass news agency.
In Africa, Russia is re-discovering it’s Cold-War Era Soviet colonial roots. Tanzania’s Chamber of Commerce, Industries, and Agriculture (TCCIA) has signed a Memorandum of Understanding (MoU) with Russia’s Universa Blockchain to start issuing Certificate of Origin of goods for its members electronically. Earlier, the Managing Director of Universa Blockchain, Alexander Borodish said the new system would increase the confidence of customers since they would know exactly the origin where the goods come from.
Tanzania Chamber of Commerce, Industries & Agriculture (TCCIA) signed a Memorandum of Understanding (MoU) with Russia's Universa Blockchain to start issuing Certificates of Origin of Goods for its members electronically. (January 16, 2023)
In addition to these initiatives, Russia is also actively investing in the development of new blockchain technologies. This includes the development of a national blockchain platform called “Unified Digital Platform” (UDP) which will allow government agencies to securely store and share data. UDP is expected to significantly reduce the cost and complexity of government operations while also providing a secure and transparent platform for data storage and sharing.Furthermore, Russia has also invested heavily in research and development of distributed ledger technology (DLT), with the goal of creating an open-source platform that can be used by businesses, governments, and individuals around the world. The Russian government's commitment to blockchain technology has enabled it to become a leader in this space.
Russia is also set to pilot another national blockchain-based e-voting system. The new system was developed in partnership between Rostelecom, Russia’s largest integrated provider, and Waves Enterprise. Another recent blockchain e-voting experiment in Russia ended in a fiasco after the system suffered a number of setbacks and attacks. The Russian government used a different blockchain provider of digital services and solutions, Bitfury, for that particular implementation, however.
Russian Tech Week Vice-rector for additional education Asali Asaliyev & CEO of Bitfury Dmitry Ufayev signed the cooperation agreement between Plekhanov University and Bitfury Group. (November, 21, 2018)
Russia is also actively supporting the development of blockchain-based applications in other areas such as healthcare and finance. For example, the country has recently launched a blockchain-based platform called “Medchain” which allows healthcare providers to securely store and share patient data. Medchain is expected to revolutionize medical records management by providing secure access to patient data while ensuring privacy and confidentiality.
In the finance sector, Russia is exploring the use of blockchain technology to improve banking services such as payments and remittances. The country's central bank has already launched a pilot project that uses blockchain technology for cross-border payments. This project will allow users to transfer funds quickly, securely, and cost-effectively between different countries. Russia is also looking into developing a national digital currency that will be based on distributed ledger technology.
Another major project for the Russian government's blockchain ambitions is at Moscow's Sheremetyevo Airport. Putin-oligarch-owned Gazprom has connected to the Smart Fuel blockchain system. Gazprom Neft (it's subsidiary Gazpromneft-Aero - has developed this platform) announced this in mid-May 2023. It is noted that the digital system allows you to instantly pay for refueling "to the wing." With the help of the blockchain platform of the Gazpromneft-Aero jet fuel enterprise, Smartavia aircraft will be serviced at the Moscow airport.
Gazpromneft-Aero stressed that the order of refueling, payment, and exchange of documents takes place online: information about operations is received on the airline's flight mission and in the digital accounting system at fuel tankers, and transaction data is confirmed by the participants in the process and stored in the blockchain system. At the time, Gazpromneft-Aero added that by mid-May 2023, the Smart Fuel platform is available at 18 airports in Russia.
Also in Russia, blockchain technology was used to summarize the results of a sporting event last month. The judges of the triathlon competition in Almetyevsk signed the results protocol with an electronic signature and saved it with a smart contract, using the blockchain platform Masterchain. The protocol was then imported electronically to the “Moi sport” platform, where their results were reflected in the contestants’ profiles.According to representatives of the Masterchain press service, the new service is designed to optimize the business processes of both individual sports institutions and the industry as a whole. It is reported that the platform will eliminate the need for paper records, their further storage, and transportation, and simplify the search for athletes’ results. In addition, the service can be used for the automatic assignment of sports grades and award athletes.
Overall, Russia's commitment to developing and implementing blockchain solutions shows its dedication to becoming a leader in this rapidly evolving field. Russia is also taking steps to ensure that blockchain technology is used in a wide variety of industries. In May 2023, the Russian Ministry of Digital Development, Communications, and Mass Media announced that it was working with the Russian Investment Platform to create a blockchain system for registering and managing intellectual property rights. The system will be based on the Ethereum blockchain and will help protect copyrights, trademarks, and patents. These efforts demonstrate that Russia is committed to becoming a world leader in blockchain technology adoption. By embracing this innovative technology across industries, Russia is paving the way for greater efficiency throughout its economy.
Chinese Blockchain Expansionism:
China has been actively promoting the development of its blockchain industry, recognizing its potential to drive industrial growth and innovation. The Chinese government's focus on blockchain technology for industrial use underscores its belief in the transformative power of this technology. By encouraging the integration of blockchain into various sectors, China aims to build a robust and efficient digital infrastructure that can support its economic ambitions (both domestically and abroad).
China attaches great importance to the application and development of blockchain technology. President Xi Jinping has emphasized the need to expedite the development of blockchain technology and industrial innovation and to actively advance its integration for economic and social development. China has the most blockchain patent applications of any country, accounting for 84 percent of the world’s total, a government official said.
The application of blockchain in China has been rising rapidly in recent years, with the market size rising to 8.46 billion yuan in 2022, according to data provider Statista. On June 2nd of 2023, China’s Ministry of Industry and Information Technology (MIIT) released the country’s first national standard for blockchain technology, aiming to accelerate the development of the emerging industry. The move further accelerates the standardization of China’s blockchain industry and paves the way for its high-quality development, said an official at the MIIT, according to Xinhua.
In February, the Chinese Ministry of Science and Technology approved the establishment of the National Blockchain Technology Innovation Center in Beijing, which will focus on areas such as basic theory, software, and hardware, according to Beijing Daily. The center was launched in Beijing’s Zhongguancun area, dubbed “China’s silicon valley,” on May 10 of this year. During a forum held in May, the latest generation processor from China was unveiled, showcasing a performance that is four to five times better than its predecessor.
The 2023 Zhongguancun Forum’s inauguration ceremony witnessed the unveiling of a novel 256-core blockchain acceleration processor by the Beijing Academy of Blockchain and Edge Computing (BABEC). Zhang Bo, the Director of the hardware research center at BABEC, has affirmed that the latest processor generation has notably expedited the blockchain transaction process. The semiconductor incorporates a top-notch streaming data encryption and decryption engine, rendering it the most secure chip currently obtainable.
China's blockchain initiatives extend beyond its domestic market. The Blockchain-based Service Network (BSN) and the Digital Currency Electronic Payment (DCEP) form the backbone of China's strategy for internationalization. The BSN, a national digital marketplace, aims to streamline processes and reduce friction for both domestic and international market participants. By integrating with the BSN and utilizing the DCEP, non-China markets will have to engage with China markets, further reinforcing China's position as a global blockchain leader.
The Chinese government has been actively promoting the development of blockchain technology for industrial use, recognizing its potential to drive economic growth and innovation. China's blockchain initiatives have extended beyond its domestic market as well. Through initiatives such as the Blockchain-based Service Network (BSN) and Digital Currency, the impact of China's blockchain initiatives goes beyond direct engagement with the country. The vast socio-technical transformation brought about by the BSN and DCEP will reverberate across the global landscape.
China's blockchain ambitions have the potential to reshape international finance, trade, and governance, influencing even those who may not be directly engaged with China. Red Date Technology, the developer of China’s state-backed blockchain infrastructure Blockchain-based Service Network (BSN), has partnered with Dubai-based fintech firm Singularity Innovations to offer blockchain infrastructure services in the Middle East and Africa.BSN, regarded by some market participants as leading the digital equivalent of Beijing’s multibillion-dollar Belt and Road infrastructure plan, was founded in 2020 to help shape China’s Web 3.0 infrastructure. It has powerful backers, including the National Development and Reform Commission, which sets and executes national economic policy.
Malaysia also stands to gain from China's blockchain technology for the Preferential Certificate of Origin (PCO) system, which will facilitate its exports to China, the Ministry of International Trade and Industry said. The system, through its proposed single window framework, aims to improve trade facilitation and reduce technical barriers by offering more efficient and secure processing of goods originating from Malaysia to China, the Chinese state-owned People’s Daily said in a statement.
In May of 2022, Conflux Network, the first regulatory-compliant public blockchain in China and global communications network, China Telecom, unveiled its jointly developed Blockchain SIM (BSIM) card at the Xuhui District West Bank Artificial Intelligence Center in Shanghai. In a world first, the BSIM card is a mobile user identification card based on blockchain technology. With an appearance nearly identical to traditional SIM cards, the BSIM card is fully compatible with mainstream mobile terminal systems such as Android and iOS. It also boasts storage space 10-20 times larger than traditional SIM cards and computing power several dozen times greater.
In jurisdictions all across China, all documents served electronically by more than 3,500 courts across China can be verified online on the Internet-based Judicial Blockchain Platform. After receiving documents served electronically by courts, the parties or trusted third parties may access the Internet-based Judicial Blockchain Platform to verify them. The Judicial Blockchain Platform, a product developed by China’s Supreme People’s Court (SPC), provides Blockchain trusted services in relevant legal activities by utilizing the technical features of Blockchain, such as decentralization, multi-consensus, tamper-proof, and traceability.
The Tianjin Port blockchain pilot project, an initiative using blockchain technology in cross-border trade, was launched on April 17 in Tianjin. The project is being led by WG (Tianjin) Technology Development in the Dongjiang port area and is considered China’s and the world's first port to integrate blockchain technology into trade systems. Chen Zhiyuan, WG Tech president and CEO, said the company has initiated partnerships with ICBC, Tewoo Group, Zhenhua Logistic Group, China Inspection and Certification Group, China Silk Road Group, PICC, CPIC, and Huaxia Bank.
Together they have established the Blockchain Cross-Board Trade Promotion Association to promote the development of the TBC trade express ecosystem. WG Tech will now commence work connecting customs in China with other countries, the internationalization of the renminbi, the establishment of a multilateral free trading system and integrity trading system, and the globalization of commodity traceability.
Outside data, trade, and international affairs; the Chinese military wants in on the action. According to the People’s Liberation Army (PLA) official English propaganda site, the Chinese military could adopt blockchain technology to manage personnel data, boost training and mission performances, and provide soldiers with earned tokens that could be used to collect rewards, a move that experts said could give more immediate incentives to military personnel compared to previous reward systems.
On the American homefront, China is very willing to utilize these innovations against the U.S. which are currently banned for use by everyday citizens in mainland China. In October of 2022, The U.S. Department of Justice accused two Chinese intelligence officers of obstruction of justice for allegedly attempting to bribe a U.S. government employee with $61,000 in Bitcoin to steal documents related to an investigation into Chinese tech giant Huawei. The DOJ says the operation began in 2019 when the two intelligence officers approached a government employee who was a double agent working for the Federal Bureau of Investigation.
The DOJ alleged that in September 2022, Guochun He told the government employee that they would provide additional payment in Bitcoin for additional information beyond that which was already provided. In October, the operatives allegedly paid the employee $20,000 in Bitcoin. Russia also uses crypto internationally to advance its strategic objectives. In July 2018, a group of Russian military intelligence officers were indicted as part of the investigation into interference in the 2016 U.S. presidential election allegedly using bitcoin to fund their operations.
The blockchain revolution is well underway, with Russia and China at the forefront of this transformative movement. Both countries have recognized the potential of blockchain technology to revolutionize various sectors and are actively pursuing initiatives to harness its power. Russia and China are positioning themselves as leaders in the blockchain revolution, from state-backed cryptocurrencies to internationalization strategies. As the world embraces this technology, it is crucial to monitor these developments and understand the potential implications for the global economy, governance, and beyond.
