The Russian Association of Corporate Treasurers has announced that it will be coordinating with the Russian Central Bank to test Masterchain, blockchain technology developed with the help of the Russian government. Masterchain is designed to make inter-bank communications cheaper and more efficient. Eventually, Masterchain might replace The Society for Worldwide Interbank Financial Telecommunication (SWIFT).
SWIFT is a network that connects 11,000 financial institutions in 200 countries. It sends highly secured messages between financial institutions. SWIFT doesn’t directly facilitate international money transfers, instead, it sends payment orders that are settled with correspondent accounts that institutions have with each other.
Economic sanctions from the United States and European Union have caused Russia to be concerned that it might be banned from SWIFT, so Russia has been experimenting with technology to replace SWIFT.
Masterchain uses blockchain technology to send cryptographically secure communications between banks and financial institutions in a similar style to SWIFT; 14 of the largest banks in Russia and the Russian fintech association collaborated in the development of Masterchain. The Masterchain software is Ethereum-based, a top cryptocurrency that supports blockchain smart contracts.
In addition to being a replacement for SWIFT, Masterchain will also store customer credit and fraud reports in order to create a database that all the banks in Russia can check before granting a loan or giving credit to a client. This will reduce fraud and has the potential to save the banking system a lot of money.
Russian government agencies responsible for contract registration and market regulation will also be included in the Masterchain system. Masterchain claims to make the processing of mortgage contracts five times cheaper and transactions that take minutes instead of days.
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