The Moscow Credit Bank in Russia is responsible for the most recent noteworthy event: issuing a blockchain-based promissory note denominated in Chinese yuan.
According to the current exchange rate, this service is the first of its kind to be offered anywhere in the country and comes with a bank guarantee of more than 100 million Chinese yuan (almost $144,600).
The Moscow Credit Bank has issued (1) a statement indicating that the Chinese yuan transaction was carried out on Russia’s national blockchain network, also known as the Masterchain blockchain platform.
The participants in this Russian blockchain network are able to transfer digital assets to one another.
According to the banking institution, one of the benefits of executing the trade on the blockchain was that
“the recipient does not have to wait for physical paper and submit a separate demand to the bank to certify the legitimacy of the issued document.”
A loan company provides a financial protection mechanism in the form of a bank guarantee.
In addition, under the terms of a legal contract, a bank agrees to accept full financial responsibility for a particular transaction if a customer cannot meet their responsibilities.
It is common practice in international business dealings to use bank guarantees to assuring payment disputes and the shipment of products per the terms of the agreement.
Functioning of the Masterchain Distributed Ledger Platform
Using the Masterchain blockchain platform, three parties have agreed upon an existing bank guarantee that is ready to be used.
The Moscow Credit Bank asserted that users are unable to spoof it.
Because all of the importers’ contracts are tied to the value of the Chinese currency, the bank guarantee is also denominated in the Chinese Yuan at the moment.
If any payment is made in accordance with this assurance, the beneficiary will be given Russian rubles at the rate of exchange decided by the parties concerned. Natalia Bahova, Director of the ISFD of the MCB, made the following statement in response to the recent development:
“The first digital bank guarantee on the market was given in yuan and done so through the Masterchain system. “
The vast majority of contracts involving international trade are settled in Chinese currency, and the requirement that payments be made in yuan continues to rise.
This is a natural progression for the market, and in the not-too-distant future, we will observe more instances of the same thing happening.
The approach will be especially useful for huge conglomerates of firms with a large number of subsidiaries that obtain bank guarantees on a regular basis and in large amounts.
In order to circumvent the sanctions imposed by the West, Russia is working to strengthen its relationships with countries such as China and Iran.
Also, it is investigating the potential applications of blockchain technology in order to lessen the negative effects of the penalties. In addition, Russia and Iran are collaborating on the development of a gold-backed stablecoin.