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The transaction took place on Russia’s national blockchain network aka the Masterchain blockchain platform.
In the latest development, Russia-based Moscow Credit Bank issued a blockchain-based bank guarantee in Chinese yuan. This is the first-of-its-kind product in the country with a bank guarantee exceeding 100 million Chinese yuan – or nearly $144,600 as per the conversion rate.
As per the statement from the Moscow Credit Bank, the transaction with Chinese yuan took place on Russia’s national blockchain network aka the Masterchain blockchain platform. This Russian blockchain network helps in transferring digital assets between participants.
As per the financial institution, one advantage of conducting the transaction on-chain was that “the beneficiary does not need to wait for the paper version and make a separate request to the bank to confirm the authenticity of the issued document.”
A bank guarantee serves as a financial safeguard offered by a lending institution. Also, under a contractual agreement, a bank undertakes financial responsibility for a specific transaction in the case of a customer failing to fulfill his/her obligations. Bank guarantees are quite popular in international transactions to ensure payment settlements and delivery of goods as per the agreement.
Working of the Masterchian Blockchain Platform
A readymade bank guarantee appears on the Masterchain blockchain platform agreed upon by three parties. The Moscow Credit Bank stated that users cannot fake it. Also, the bank guarantee is currently in Chinese Yuan since the importers’ contracts are all pegged to the Chinese currency.
If any payment happens under this guarantee, the beneficiary shall receive Russian rubles at the exchange rate agreed upon by the involved parties. Speaking on the development, Natalia Bahova, Director of the International and Structured Finance Department of the MCB said:
“This is the first digital bank guarantee in the market, which was issued in yuan, through the Masterchain system. Most foreign trade contracts are serviced in Chinese currency, and the demand for payments in yuan is only growing. This is a logical step for the market, we will see more examples of this in the near future. The solution 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”.
In order to overcome the West sanctions, Russia is building strong relations with partners like China and Iran. It’s also looking at ways to leverage blockchain technology in order to reduce the impact of sanctions. Furthermore, Russia and Iran are also working on a gold-backed stablecoin.