Report: Russia’s ‘VK’ social media platform considering its own crypto

According to a report by Russian news outlet RNS, VKontake (VK) is currently in the development phase of a native cryptocurrency. The news agency cites that this information is from a source familiar with the company’s plans, which provided the publication with an internal presentation about the company’s cryptocurrency initiative.

In the presentation, RNS reports, the company states it is considering rewarding users for their time spent on the platform as well as other specific activities. Users could be rewarded in the new coin by posting quality content, for example, or by curating other users’ content.

Moreover, users would be able to transfer their earned "VK coins" to other users, exchange them for tangible goods, and convert them into fiat currency through the social network’s recently launched payment service, VK Pay.

So far, VK has declined to comment on the leaked cryptocurrency plans.

What is VK?

VKontakte is the largest social media network in Russia. Founded in 2016 by Telegram co-founder Pavel Durov, the company boasts over 500 million users and is in the top twelve most visited sites in the world, according to SimilarWeb.

VK enables users to post content, communicate over messenger, share events, images, and videos, listen to music, consume news content, and play online games.

From a functionality and features point of view, VK is very similar to Facebook – a similarity that extends to its user interface, color themes and sign up process. Nonetheless, VK has managed to attract a huge user base and has established itself as the go-to social network in most Russian speaking nations.

Its success soon drew the attention of Russia authorities, and,true-to-form in April 2014, founder and CEO Durov was pushed out of his company after Kremlin allies took over the social network, according to the entrepreneur, who left Russia with "no plans to go back." Additionally, after his ousting at VK, Durov told TechCrunch that "[Russia] is incompatible with Internet business at the moment."

Despite the controversial departure of Durov and the Kremlin’s alleged involvement in the company, Vk continued to thrive and grow its dominance in the Eastern European social media market.

The addition of its own cryptocurrency, therefore, could boost the company to new highs if the implementation is done correctly. Moreover, it could enable VK to remain competitive against Facebook, which is reportedly in the process of launching its own stablecoin.

Russia – home of (fraudulent) ICOs

According to data compiled by venture capital firm Atomico, Moscow is on the top spot for the number of ICOs launched based on the CEO/founder’s location.

A report by Quartz suggests that this is due to the country’s massive talent pool of technology professionals, which is a legacy of the Soviet Union’s prioritization of science and physics education. As a result, Russia has a large number of developers who are attracted to the blockchain sector due to its accessibility and high-earning potential. Moreover, outside of the local startup scene, it is not easy to find employment in Russa’s corporate sector.

ICOs were particularly hot in Russia as they enabled developers to get their hands on funding without having to go through the traditional financial system. However, not all ICOs launched by Russian developers and entrepreneurs had the best intention in mind.

On the topic of Russian ICOs, John Slyusarev, managing partner of venture capital firm SMC Capital, told Forbes: "The majority of investors have their doubts about investing in Russian crypto-startups. There are a lot of red flags for international investors. […] There has been some blowouts in Russian Ponzi projects and fraud schemes that have hurt Russia’s reputation."

Moreover, according to Russian newspaper Izvestia, which cited the Russian Association of Cryptocurrency and Blockchain, 50 percent of the $300 million raised by Russian ICOs in 2017 went into pyramid schemes, confirmed Slyusarev’s views on the Russian ICO market.

Russia’s difficult relationship with crypto

While there are a number of blockchain startups based in Russia, most notably Waves, the authorities in the twelfth largest economy in the world have generally aired on the crypto-non-friendly side.

While blockchain technology is part of the country’s digital economy plans, cryptocurrencies have had to fight an uphill battle for acceptance with their current state lying somewhere between contentious and tolerated.

Only a few weeks ago, a court ordered the blocking of several bitcoin exchanges in Russia and declared that bitcoin should not be used as a currency surrogate there as it facilitated the growth of the shadow economy. This is not the first time that Russia has blocked bitcoin trading and information platforms.

Fortunately, there is a light at the end of the tunnel for the country’s cryptocurrency community. Vladimir Putin has ordered the federal government to adopt laws aimed at boosting the country’s digital economy. by July 1, 2019.