Russian Banks Issue Bank Guarantee in Chinese Yuan Using Blockchain – Finance Bitcoin News

A bank in Russia has issued the country’s first blockchain-based bank guarantee denominated in Chinese currency. The financial institution emphasized the advantages of using a digital form of the document and pointed out that the demand for yuan payments is increasing.

MKB uses Bank of Russia’s Masterchain to issue bank guarantee in Yuan

Moscow Credit Bank (MKB) has issued what it described as Russia’s first digital bank guarantee for an amount of over 100 million Chinese yuan, using blockchain technology – the Masterchain platform developed by the Central Bank of Russia.

In a press release cited by RBC Crypto, MKB explained that the guarantee is denominated in the currency to which the importer’s contracts are linked. In case of payment below that, the supplier will receive Russian rubles at an exchange rate agreed by the parties.

The bank guarantee was agreed by the three stakeholders: the principal, the guarantor bank and the beneficiary. The stated advantage of using a digital document, which apparently cannot be forged or lost, is that the recipient does not have to wait for the paper version or request a confirmation from the bank about the authenticity of the guarantee.

“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,” commented Natalya Bahova, director of MKB’s international and structured finance department .

The executive added that this is a “logical step” and that it is likely to see more such examples in the future. “The decision 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,” Bahova elaborated.

Russian companies spend about 900 million rubles annually (almost $12 million) to verify the authenticity of bank guarantees, the report noted. And even then, about 0.5% of them eventually turn out to be fake. Related risks are estimated at 75 billion rubles.

Amid sanctions imposed by the West over its invasion of Ukraine, Russia has been considering ways to reduce its reliance on the US dollar and the traditional financial system, including using other fiat currencies, blockchain technologies and crypto payments to circumvent the restrictions.

A law “On Digital Financial Assets” came into force in January 2021, and for the past year officials in Moscow have been working to expand the regulatory framework to cover decentralized cryptocurrencies such as bitcoin and the like.

In early December, a company licensed by the Bank of Russia announced the country’s first authorized digital asset transaction involving a foreign currency, China’s yuan. The two countries have also developed digital versions of their fiat currencies.

Do you think there will be more use cases involving crypto technologies and alternative currencies in Russia? Share your thoughts on the topic in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’ quote: “To be a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.