Vyacheslav Putilovsky, an analyst at Expert RA:
"Russia's not a very developed banking market. The top banks here are betting that they can catch up and maybe even overtake their Western competitors in their adaptation of this type of technology."
The country's biggest banks such as Sberbank and VTB Group have developed a distributed ledger called Masterchain.
The mechanism is based on a modified ethereum protocol, complies with Russian national security standards, and is supported by the country's central bank.
Ethereum is defined as a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship, or third-party interference.
The blockchain is special platform that allows two or more partners to enter into a smart contract without an intermediary. The technology may also be used to verify contracts, intellectual property rights, and online public ledgers without a third party.
This may be a breakthrough for the global financial system and other industries. Eliminating intermediaries such as public notaries can slash costs by up to 80 percent, as reported by FinTech Association.
A number of Russian banks are planning to launch a commercial application of the system for mortgages by mid-2018, including Otkritie, Alfa Bank, and TCS Group.
The Central Bank of Russia has already started a pilot of an ethereum-based blockchain to process online payments and verify customer data.
To minimize fraud risks and unwanted expenses, Masterchain also enables Russian lenders to search through each other's database of blacklisted clients.
Like ether, a cryptocurrency used by the Ethereum blockchain, Russia's Masterchain will have its own virtual currency called "gas."