This is the first time an EU member state will use blockchain technology for bank and insurance guarantees, according to Algorand.
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Layer-1 blockchain platform Algorand has been chosen as the public blockchain to support an “innovative digital guarantees platform” to be used in Italy’s banking and insurance markets.
The Algorand-supported platform is expected to launch in early 2023. According to Algorand’s Dec. 13 announcement, this is the first time a European Union member state will use blockchain technology for bank and insurance guarantees.
A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan. It’s an alternative to providing a security bond or a deposit to a supplier or vendor. An insurance guarantee is similar but is offered by an insurance company rather than a bank.
Algorand said that blockchain technology was ideally suited for the “digital sureties” platform because of its fast, efficient, low-cost and scalable data transactions, as well as its ability to provide protection against fraud.
— Algorand (@Algorand) December 13, 2022
The blockchain-backed digital sureties platform is being developed by the Research Center on Technologies, Innovation and Finance of the Catholic University of Milan (CETIF) and is a part of Italy’s National Recovery and Resilience Plan, an initiative set to boost Italy’s economic recovery following the COVID-19 crisis.
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Federico Rajola, professor at CETIF, said they chose Algorand for its “unparalleled level of innovation” among permissionless digital ledger technologies and its “leadership in sustainability,” adding:
“Our goal is to help Italy not only recover from the economic impact of Covid-19, but also excel through innovation and leadership […] We believe these platforms can and will dramatically contribute to the country’s competitive sustainability for the benefit of all.”
In September, Cointelegraph reported that Algorand had increased its transaction speed, processing capacity, and cross-chain functionality with a major protocol upgrade. The layer-1 blockchain network implemented state proofs to its mainnet, enabling trustless communication between different blockchain protocols. The upgrade increased Algorand’s processing speed from 1,200 to 6,000 transactions per second.