A bank in Russia issued the country’s first blockchain-based bank guarantee denominated in Chinese currency. The financial institution highlighted the advantages of using a digital form of the document, noting that the demand for yuan payments is growing.
MKB Employs Bank of Russia Masterchain to Issue Yuan Bank Guarantees
The Credit Bank of Moscow (MKB) issued what it described as Russia’s first digital bank guarantee for an amount exceeding 100 million Chinese yuan, using blockchain technology, the Masterchain platform developed by the Central Bank of Russia.
in a Press release Quoted by RBC Crypto, MKB explained that the collateral is denominated in the currency to which the importer’s contracts are tied. In case of a payment under it, the provider will receive Russian rubles at the exchange rate agreed by the parties.
The bank guarantee was agreed by the three interested parties: the principal, the guarantor bank and the beneficiary. The touted advantage of using a digital document, which apparently cannot be forged or lost, is that the beneficiary does not need to wait for the paper version or request confirmation from the bank of the authenticity of the guarantee.
“This is the first digital bank guarantee on the market, which was issued in yuan, through the Masterchain system. Most foreign trade contracts are handled in Chinese currency, and the demand for yuan payments continues to grow,” said Natalya Bahova, Director of MKB’s Structured and International Finance Department.
The executive added that this is a “logical step” and that we are likely to see more such examples in the future. “The decision will be especially relevant for large groups of companies that have many subsidiaries that accept bank guarantees in large amounts and on a regular basis,” Bahova explained.
Russian companies spend about 900 million rubles a year (nearly $12 million) to verify the authenticity of bank guarantees, the report said. And even then, around 0.5% of them eventually turn out to be fake. The related risks have been estimated at 75 billion rubles.
Amid Western-imposed sanctions 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 restrictions.
A law “On Digital Financial Assets” came into force in January 2021, and for the past year Moscow officials have been working to expand the regulatory framework to cover decentralized cryptocurrencies like 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, the Chinese yuan. The two countries have also been developing digital versions of their fiat currencies.
Do you think there will be more use cases related to crypto technologies and altcoins in Russia? Share your thoughts on the subject in the comments section below.
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