Today Abu Dhabi’s Al Hilal Bank executed a sukuk transaction using blockchain. A sukuk is an Islamic bond that doesn’t pay interest and hence complies with Islamic law. Instead, sukuks usually involve financing assets where the bondholder has an ownership interest and receives a portion of the revenue.
Al Hilal Bank issued a $500m 5-year sukuk in September. The blockchain transaction involved a secondary market sale and settlement of $1m of the sukuk to a private investor. Reuters reported that fintech Jibrel Network was involved in the deal.
Numerous banks have executed pilot loan and bond transactions. The benefits are transparency between parties, ease of oversight by regulators, and the potential for instant settlement.
Last week Russia’s Sberbank confirmed it had completed the full life cycle of a bond on blockchain from issuance to redemption, including interest payment.
Several pilots have been run with a variety of other debt types. JP Morgan issued a Certificate of Deposit for National Bank of Canada. Also in Canada, BMO Capital Markets was the issuer for a floating rate Deposit Note for a pension plan. And BBVA has issued multiple corporate loans, including a syndicated loan for Red Electrica.