Russia’s second largest bank issues a bank guarantee based on blockchain technology

VTB Bank is testing a system based on blockchain technology to provide bank guarantees to the country’s largest mobile phone network provider, MTS.

VTB, the second largest bank in Russia after Sberbank, tested a new blockchain-based system for issuing bank guarantees.

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

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As part of the development, the bank issued a guarantee to MTS for the fulfilment of payment obligations in the amount of 392 million roubles, or $5 million. The commercial operation implemented Masterchain, an Ethereum-based Bitcoin Trader prototype blockchain network backed by the Russian central bank.

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

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Vadim Kulik, vice-president and chairman of the board of directors of VTB, said that the new integration allowed the bank to accelerate the process of issuing guarantees and to significantly reduce paperwork. The deployment of blockchain also eliminates the fraud risks associated with bank guarantees, he said.

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

VTB did not respond to Cointelegraph’s request to provide further details on the development.

Introduced in 2016, Masterchain is known as the first certified blockchain platform in Russia, which uses local crypto-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.

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VTB’s move to introduce blockchain-based guarantees comes in the midst of a number of major Russian banks actively exploring blockchain technology.

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