Russian Central Bank Executive Says ICOs Hold Potential For Startups

A senior executive at the Russian central bank has said that initial coin offerings could hold potential for startups, as an alternative mechanism for raising capital.

According to reports in local media, Sergei Shvetsov, the first deputy chairman of the Bank of Russia, made the comments as part of a wider show of support for developing the “blockchain funding model,” in stark contrast to earlier warnings about the technology.

As recently as September, the Bank of Russia was leading calls for investors to exercise caution over investing in ICOs and cryptocurrencies, and lawmakers in Russia have since been implementing directives from the office of President Vladimir Putin governing how cryptocurrencies and other digital tokens can be used in the country.

Today’s news of support from the Bank of Russia will be interpreted as a positive, although there is as yet no indication of how these views reconcile with broader regulatory efforts in Russia.

In his comments, Shvetsov said the Russian economy could ultimately stand to benefit from a warmer embrace of blockchain technology.

“Our country has a tremendous potential of innovations, our students, young people and entrepreneurs have the edge over any country in the world from the viewpoint of ideas, and amid the lack of classical institutions of startups support, ICO development has a huge potential to finance those ideas ... Hopefully, ICO will take a rightful place on Russia’s financial market.”

The Bank of Russia is not responsible for regulating financial markets in Russia, but the comments will be seen as a significant boost for those who advocate a more relaxed approach to cryptocurrency regulation.

There are as yet no suggestions of how the bank intends to aid the development of blockchain and ICO funding models.

ICOs, or initial coin offerings, have been big news in 2017, with well over $2 billion raised through the mechanism this year alone.

Issuing companies launch a token with secondary resale potential, and in some cases an intrinsic value relative to the specific platform or company launching the token.

However, financial regulators worldwide have become increasingly keen to regulate ICOs, or to clarify instances where coin offerings could be deemed securities, with Russia in particular adopting a hard stance.

It remains to be seen whether the comments from the Bank of Russia signal a change in attitudes and approach at a government level.