A financial institution in Russia has enabled the country’s first blockchain-based bank guarantee in Chinese currency. The bank highlighted the advantages of using a digital version of the document and noted the rising demand for yuan.

MKB Utilizes Bank Of Russia Masterchain to Issue Yuan Bank Guarantees

The Credit Bank of Moscow (MKB) issued the nation’s first digital bank guarantee worth more than 100 million Chinese yuan using the blockchain-based Masterchain platform developed by the Bank of Russia. According to RBC Crypto’s press release, MKB explained that the collateral was denominated in the same currency as the importer’s contracts. Once the payment is made, the provider will be notified and the exchange rate between the parties will be set in rubles.

The three parties involved in the bank guarantee are the principal, the bank guarantor, and the beneficiary. The benefits of using a digital document include it being indestructible, and the beneficiary doesn’t have to wait for the paper copy or confirm its authenticity with the bank.

“This is the first digital bank guarantee on the market that has been issued in yuan via the Masterchain system. Most foreign trade contracts are denominated in Chinese currency, and the demand for yuan payments is increasing,” said Natalya Bahova, Director of MKB’s Structured International Finance Department.

The executive further noted that this move was a “logical step,” and that more such examples are likely to follow. “The decision will be especially relevant for large groups of companies that regularly accept bank guarantees for large amounts,” Bahova added.

According to the report, businesses spend roughly $12 million per year on verifying bank guarantees, or 900 million rubles, with only 0.5 percent of them being fake. The associated risks have been estimated at 75 billion rubles.

Amid Western sanctions imposed on Russia for its invasion of Ukraine, the country has been exploring different ways to reduce its dependence on the US dollar, the traditional financial system, and to employ other fiat currencies and blockchain technologies, as well as crypto payments, to evade restrictions.

Last year, Moscow officials began trying to enhance the regulatory framework to include decentralized cryptocurrencies such as bitcoin, and in January 2021, the “On Digital Financial Assets” law came into force.

In early December 2020, the Bank of Russia announced the country’s first authorized foreign currency digital asset transaction involving the Chinese yuan. The two states have also developed digital versions of their respective fiat currencies.

Do you think there will be more uses for crypto technology and altcoins in Russia? Share your thoughts in the comments section below.

Lubomir Tassev

Lubomir Tassev Are you tech-savvy? Eastern European A journalist who loves journalism Hitchens’ quote: “Being a writer is who I am, more than what I do.” In Two other sources of inspiration are crypto, blockchain, and fintech.

 

 

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