In an official statement, Russian bank VTB, the second largest and most important bank in the country, announced that it has issued a digital guarantee on blockchain in favor of the mobile phone services company MTS.
Russia is one of the countries that, worldwide, is seeking to lead the industry blockchain and has made this technology one of the main priorities for the state in the coming years. Thus, it is not surprising that the second largest bank in the country by capitalization is innovating within this technology.
In a Spanish President Pedro Sánchez’s announcement VTB has officially informed the community that it has used blockchain technology to issue a digital guarantee of 392 million Russian rubles – $5 million – for business operations in favor of MTS, the largest mobile service provider in Russia. The issuance of the bank guarantee was carried out through the Russian platform Masterchain Blockchain, designed and developed on the network Ethereum by the Central Bank of Russia together with the Fintech Association, various commercial banks and other market participants.
With this move, VTB becomes the first bank in the country to issue a digital bank guarantee on the Masterchain network, which is legally binding without the need for a paper document, as indicated by the Fintech Association.
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Legitimacy, greater trust and speed
According to the Vice President and Chairman of the Board of Directors of VTB, Vadim Kulik, using blockchain technology in the processes of issuing bank guarantees allows the entire procedure necessary for their issuance to be accelerated and optimized, which is very useful for the beneficiary of the guarantee. Likewise, Kulik highlighted that, as it is digital, the beneficiary can also verify the legitimacy of the guarantee, raising the level of trust and security in the issuing entity. The digital issuance of bank guarantees also helps to considerably reduce paperwork, making the process faster, more efficient and simpler, and minimizing environmental pollution.
“This speeds up the process of obtaining guarantees from the beneficiary and reduces paperwork. In addition, placing the data on a distributed ledger eliminates the risks of fraud with bank guarantees.”
Similarly, like VTB, other banks and financial organizations, such as Gazprom Neft, Alfa Bank, PSB, Raiffeisenbank and Ak Bars, which also participate in the Masterchain Blockchain platform, can issue their own digital guarantees, since each one has its own node within this network. Moreover, this blockchain platform is the first digital platform based on this technology, certified in Russia, which uses cryptographic means of protecting information designed in the country.
Another benefit of issuing digital guarantees highlighted by the entity was the possibility of carrying out the transaction in real time. The entire process was carried out in a simple and secure manner, allowing VTB to issue the digital guarantee registered with a reinforced qualified signature and MTS to accept the document, sending the corresponding notification to the bank.
VTB's digital transformation
Kulik stressed that the implementation of blockchain technology in this procedure is part of the bank's digital transformation process, which is adopting new technological developments to optimize its services and offer a better user experience to its customers. The executive also pointed out that VTB is creating IT (Information Technology) services that simplify and accelerate the bank's interaction with its customers, providing a highly efficient service.
At the beginning of 2019, this banking entity presented a license on a blockchain-based multi-issuer payment system, which allows the bank to create new innovative banking products, as well as effective digital payment services and instruments. The patent filed by the bank covers the core functions and structure of the entire system, and allows individuals and legal entities, and even other commercial banks, to use its services.
VTB is focused on making technological innovation its daily business, meeting the requirements of the Masterchain Blockchain platform and launching new products such as the issuance of digital bank guarantees.
This entity joins the initiative of many banks worldwide to use blockchain technology to improve their products and services. In Russia, the Sberbank is also innovating in blockchain for trade finance commoditiesIn Italy, more than 100 commercial banks have joined the national blockchain network tick, to facilitate the transfer of interbank data.
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