S7 Airlines and Alfa Bank perform blockchain deal
Russia’s S7 Airlines and Alfa Bank have conducted a deal using smart contracts over blockchain technology, despite Russia’s mixed feelings about bitcoin and blockchain technology.
The deal saw the practical application of blockchain technology for letter of credit settlements, says Deloitte, who advised on the deal:“Smart contracts were used to capture in the blockchain the bank’s actions with respect to the opening and execution of the letter of credit. The objective of closing the deal with blockchain technology was to test smart contract operations and their capability,
The use of smart contracts and blockchain technology aim to reduce transaction costs as well as to increase the reliability and quality of information exchange between parties to a deal. Numerous blockchain initiatives within finance are ongoing around the globe, but according to Deloitte, this marks the first such transaction in Russia.
It is no secret that Russia has mixed feelings regarding bitcoin and its underlying blockchain technology. On the one hand, the government is testing blockchain, or distributed ledger technology, with Sberbank, whilst at the same time considering a ban on bitcoin to ruble exchanges.
Despite this political uncertainty, Russian banks have been keen to keep up with the race and last July a group of Russian banks announced a private sector consortium focused on blockchain applications. The consortium is believed to include B&N Bank, QIWI, Khanty-Mansiysk Otkritie Bank, Tinkoff Bank, MDM Bank, Alfa Bank and Accenture. Meanwhile, QIWI became the first Russian company to join the R3 CEV blockchain consortium, which represents the biggest collaboration in the sector with over 60 major banks and financial institutions.
“We are glad that the blockchain technology is becoming more and more popular with innovative companies in the Russian jurisdiction,” says director, legal services for technology projects at Deloitte Artem Tolkachev.
“Legally, this transaction meets all the requirements for a letter of credit as a form of bank settlement, and demonstrates the potential of smart contract application in the framework of Russian legislation, he adds.
Deputy general director of the S7 Group, Dmitry Kudelkin, says: “The transaction enabled us to test the capabilities of smart contracts and understand how the technology helps to improve business processes and document flow efficiency. We are planning to continue cooperating with Alfa Bank in this area.”
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