A Russian bank issued the country’s first blockchain-based bank guarantee denominated in Chinese currency. The financial institution highlighted the advantages of using the document in digital form and noted the growing demand for yuan payments.
MKB Adopts Bank of Russia Masterchain, Issues Bank Guarantee in RMB
Moscow Credit Bank (MKB) has announced that it has issued Russia’s first digital bank guarantee in an amount exceeding 100 million Chinese yuan using blockchain technology (Masterchain platform) developed by the Central Bank of Russia.
In apress releasecited by RBC Crypto, MKB explains that the guarantee is denominated in the currency to which the importer’s contract is linked. For payments under it, the supplier will receive Russian rubles at the exchange rate agreed upon by the parties.
The bank guarantee is agreed upon by three stakeholders: the principal, the guaranteeing bank, and the beneficiary. Since it is a digital document that cannot be forged or lost, the beneficiary does not have to wait for a paper document and does not have to confirm the authenticity of the guarantee from the bank.
“This is the first digital bank guarantee in the market, issued in RMB through the Masterchain system. Most foreign trade contracts are serviced in Chinese currency and the demand for payments in RMB will only increase,” commented Natalya Bakhova, Director of International and Structured Finance at MKB.
The executive added that this was a “logical step” and that there could be more such cases in the future. Bakhova elaborated, “This decision will be particularly important for large corporate groups with many subsidiaries that accept bank guarantees on a large and regular basis.”
Russian companies spend about 900 million rubles (about $12 million) a year to verify the authenticity of bank guarantees, the report noted. And even then, about 0.5% are ultimately found to be fake. The associated risk is estimated at 75 billion rubles.
As Western countries impose sanctions over the invasion of Ukraine, Russia has been looking at ways to reduce its reliance on the U.S. dollar and the traditional financial system, including the use of other fiat currencies, blockchain technology, and crypto payments to get around restrictions.
The Law on Digital Financial Assets came into effect in January 2021, and over the past year, Moscow officials have been working to expand the regulatory framework to cover decentralized cryptocurrencies such as Bitcoin.
In early December, a company licensed by the Bank of Russia announced that it was the first in the country to officially authorize digital asset transactions involving foreign currencies.