Moscow Credit Bank (MCB) has turned to blockchain to issue a bank guarantee, making it the first among Russian financial institutions.
In a statement from the MCB, the bank guarantee was issued on the Masterchain blockchain platform. Moscow Credit Bank confirmed that the bank guarantee was denominated under Chinese yuan worth around $144,600.
A bank guarantee is a security from a bank assuring a beneficiary that it will cover any debts if the debtor cannot fulfill his obligations.
The bank guarantee was denominated in the Chinese yuan because the customer is an importer of Chinese goods, but the contract beneficiary will receive Russian rubles, the bank said. Natalya Bahova, an MCB director, clarified that international contracts are settled in Chinese currency, leading to a spike in demand for yuan payment.
“This is a logical step for the market, we will see more examples of this in the near future. The decision will be especially relevant for large groups of companies that have many subsidiaries that accept bank guarantees in large quantities and on a regular basis,” Bahova said.
Bahova extolled the benefits of using blockchain in giving out bank guarantees over the traditional paperwork associated with them. Transparency and the inability to forge the bank guarantee give it an edge over the conventional bureaucratic issuance process.
Using the MasterChain platform, there is no need for the beneficiary to send an application to the bank to confirm the authenticity of the bank guarantee. “It cannot be faked or lost,” said MCB’s statement, hinting that more Russian banks will switch to DLT.
Blockchain to the rescue
As Russia continues to careen under the burden of Western sanctions, the government has been exploring blockchain as a way to circumnavigate the sanctions. The country’s Finance Ministry and the central bank issued a joint statement that they are considering using stablecoins for cross-border transactions in the wake of its removal from the SWIFT network.
The development of a digital ruble with blockchain is rumored to have cross-border payment functionalities, among other features. The Russian central bank is in talks with the People’s Bank of China (PBoC) to allow seamless cross-border settlements between both countries using a central bank digital currency (CBDC).
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