Russian banks issue first blockchain-based bank guarantee in Chinese yuan
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 MCB, the bank guarantee was issued on the Masterchain blockchain platform. Moscow Credit Bank confirmed that the bank guarantee was denominated in Chinese yuan worth about $144,600.
A bank guarantee is a security from a bank that assures a beneficiary that it will cover any debt if the debtor cannot fulfill its obligations.
The bank guarantee was denominated in 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 an increase 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 particularly relevant for large groups of companies that have many subsidiaries that accept bank guarantees in large quantities and on a regular basis, said Bahova.
Bahova highlighted the benefits of using blockchain by providing bank guarantees rather than the traditional paperwork associated with them. Transparency and the inability to forge the bank guarantee give it an advantage over the conventional bureaucratic issuance process.
Using the MasterChain platform, it is not necessary for the recipient to send an application to the bank to confirm the authenticity of the bank guarantee. “It cannot be forged or lost,” MCB’s statement said, suggesting that more Russian banks will switch to DLT.
Blockchain to the rescue
As Russia continues to reel under the burden of Western sanctions, the government has explored blockchain as a way to circumvent the sanctions. The country’s finance ministry and central bank issued a joint statement that they are considering using stablecoins for cross-border transactions in the wake of their removal from the SWIFT network.
The development of a blockchain digital ruble is rumored to have cross-border payment capabilities, 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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