Italy will be making history as the first country in the European Union to employ blockchain technology in carrying out bank and insurance guarantees.
What are Bank and Insurance Guarantees?
A bank guarantee is a promise made by a bank to cover the loss of a borrower or customer if the borrower defaults on a loan or contract. It is a type of financial instrument that can be used to provide additional security to a creditor in a business transaction.
An insurance guarantee is a promise made by an insurance company to cover the loss or damage of an insured party in the event of a covered risk. It is similar to a bank guarantee in that it serves as a backstop for the insured party, ensuring that they will receive compensation if something goes wrong.
Italy’s Digital Sureties Project
The innovative digital guarantees platform, which will run on the Layer 1 blockchain Algorand, will be launched in the first quarter of 2023. Algorand was selected as the public blockchain for the digital guarantees platform because of a number of reasons, including its quick, low-fee, and scalable data transactions and protection against fraud.
The Digital Sureties platform is being created by the Research Center on Technologies, Innovation, and Finance of the Catholic University of Milan (CETIF). A professor at CETIF, Federico Rajola, mentioned:
“We selected Algorand because of its unparalleled level of innovation and security among permissionless DLTs, as well as because of its leadership in sustainability. Our goal is to help Italy not only recover from the economic impact of COVID-19, but also excel through innovation and leadership. Our ecosystemic projects are meant to help generate strategic platforms, such as the Digital Sureties platform supported by Algorand. We believe these platforms can and will dramatically contribute to the country’s competitive sustainability for the benefit of all.”
Founder of Algorand, Silvio Micali, also expressed:
“We are proud and honoured to be the public blockchain chosen by the Digital Sureties platform of Italy,” said Silvio Micali, Founder of Algorand Inc. “Through Algorand’s technology, we can help solve for many critical issues facing financial institutions and governments across the world today, bringing opportunity and inclusion to communities in need everywhere.”
The project, which is backed by Italy’s central bank, comes as part of the country’s National Recovery and Resilience Plan (NRRP), which was established in an effort for Italy’s economy to recover from the hits it sustained during the COVID-19 pandemic. Italy received approximately €200 billion in COVID-19 recovery funds from the European Union, which was the biggest amount received by a member state.