Moscow Credit Bank (MCB) has made a significant breakthrough in the use of blockchain technology by issuing a bank guarantee denominated in Chinese currency, becoming the first bank in Russia to do so.
The bank guarantee, which exceeds 100 million Chinese yuan or nearly $144,600 at the time of publication, was executed through the Masterchain blockchain platform, which is the Russian national blockchain network created to transfer digital assets between participants.
According to the bank, one of the advantages of the transaction being conducted on-chain was that the beneficiary did not need to wait for the paper version and make a separate request to the bank to confirm the authenticity of the issued document. This speeds up the process and makes it more efficient, saving time and money.
Bank guarantees are a financial safeguard offered by lending institutions to ensure that payment is made or goods are delivered as promised in international trade transactions.
The Masterchain blockchain platform is designed to display a ready-made bank guarantee that has been agreed upon by three parties, making it difficult to fake or lose.
The Chinese currency was chosen as the currency of the bank guarantee because most foreign trade contracts are serviced in Chinese currency, and the demand for payments in yuan is only growing.
According to Natalya Bahova, Director of the MCB’s International and Structured Finance Department, 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.
The bank guarantee executed by MCB serves as a testament to Russia’s ongoing commitment to embracing blockchain technology.
As part of the country’s crypto developments, Russia’s central bank is preparing to launch the first consumer pilot for its central bank digital currency (CBDC) on April 1, 2023. The digital ruble transactions will be conducted by 13 local banks and several merchants.