Moscow Credit Bank issues blockchain-based guarantee in Chinese yuan
The transaction took place on Russia’s national blockchain network aka the Masterchain blockchain platform.
In the latest development, Russian-based Moscow Credit Bank issued a blockchain-based bank guarantee in Chinese yuan. This is the first product of its kind in the country with a bank guarantee of over 100 million Chinese yuan – or almost $144,600 according to the conversion rate.
According to the statement by Moscow Credit Bank, the transaction in Chinese yuan took place on Russia’s national blockchain network, also known as the Masterchain blockchain platform. This Russian blockchain network helps transfer digital assets between participants.
According to the financial institution, an advantage of performing the transaction in the chain was that “the recipient does not have to wait for the paper version and send a separate request to the bank to confirm the authenticity of the issued document.”
A bank guarantee acts as a financial guarantee offered by a lending institution. Under a contractual agreement, a bank also assumes financial responsibility for a specific transaction in the event that a customer fails to fulfill its obligations. Bank guarantees are quite popular in international transactions to ensure payment settlement and delivery of goods as per the agreement.
Work on the Masterchian Blockchain platform
A completed bank guarantee is displayed on the Masterchain blockchain platform agreed upon by three parties. Moscow Credit Bank stated that users cannot fake it. Also, the bank guarantee is currently in Chinese yuan since the importers’ contracts are all linked to the Chinese currency.
If any payment is made under this guarantee, the recipient shall receive Russian rubles at the exchange rate agreed upon by the parties involved. Speaking about the development, Natalia Bahova, director of the international and structured finance department at MCB, said:
“This is the first digital bank guarantee in the market, which was issued in yuan, through the Masterchain system. Most foreign trade contracts are serviced in Chinese currency, and the demand for payments in yuan is only increasing. This is a logical step for the market, we will see more examples of this in the near future. The solution will be particularly relevant for large groups of companies that have many subsidiaries that accept bank guarantees in large quantities and on a regular basis”.
To overcome Western sanctions, Russia is building strong relationships with partners such as China and Iran. It is also looking at ways to leverage blockchain technology to reduce the impact of sanctions. Furthermore, Russia and Iran are also working on a gold-backed stablecoin.
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