Russia’s second largest bank tests blockchain bank guarantees

The major Russian bank VTB uses a blockchain supported by the central bank to issue bank guarantees to the local cellular network giant MTS.

Russia’s second largest bank tests bank guarantees in blockchainNOTÍCIAS

VTB, Russia’s second largest bank after Sberbank, conducted a test of a new blockchain-based system for issuing bank guarantees.

According to an official announcement on 16 December, VTB provided a blockchain-enabled bank guarantee to the country’s largest mobile phone network provider, MTS.

As part of the development, the bank issued MTS with a guarantee for payment obligations of 392 million roubles, or US$5 million. The commercial operation implemented Masterchain – a prototype blockchain based on Ethereum supported by the Russian central bank.

The parties completed the transaction in real time, with VTB issuing a signed digital guarantee with an enhanced qualified signature. The MTS then accepted the document, sending a corresponding notification to the bank.

Vadim Kulik, VTB’s vice-president and chairman of the board, said that the new integration had enabled the bank to speed up the process of issuing guarantees and significantly reduce paperwork. The implementation of the blockchain also eliminates the risks of fraud associated with bank guarantees, he noted.

Alexander Smirnov, MTS‘ director of corporate finance, stressed Bitcoin Compass that the Masterchain-based bank guarantee system will also reduce operating costs and increase competition among participating banks.

VTB did not respond to the Cointelegraph’s requests to give further details on the development.

Introduced in 2016, Masterchain is known as the first certified blockchain platform in Russia, using local cryptographic data protection methods. The platform was developed by the Russian Fintech Association together with the Bank of Russia and major financial players such as Sberbank, Alfa Bank, Tinkoff Bank and Qiwi.

VTB’s decision to introduce blockchain-based collateral occurs in the midst of a number of large Russian banks actively exploiting the technology.

In early December, Alfa-Bank, one of Russia’s largest private commercial banks, announced a blockchain-enabled project to automate services for freelancers. In September 2020, Sberbank – the country’s largest state-owned bank – joined a blockchain-based platform for commodity trade finance through its Swiss subsidiary.