Fitch says China leading in blockchain for securitization

A report by Fitch Ratings observed that the use of blockchain for securitizations in China was faster than other parts of the world, with multiple platforms being developed independently. Fitch notes that for now, blockchain is only used for certain aspects of securitization transactions instead of an end-to-end solution. It expects that to evolve as the technology, laws and regulations develop. At least eight asset-backed security transactions in China reported using blockchain for parts of the securitization process. All the transactions were privately placed, barring one by state-owned Bank of Communications (BoCom), which involved an RMB9.3 billion ($1.3 billion) residential mortgage-backed security transaction. It used BoCom’s proprietary Jucai Chain, and in this case, details of the underlying mortgages and payments are logged on the chain giving investors a transparent view. Fitch says the problem with rating such transactions is that most securitizations in China are privately placed and use a permissioned blockchain. In a previous paper, the firm outlined advantages in the use of blockchain for securitization to improve transparency and execution time. However, it acknowledged that it would take a few years for an end-to-end adoption of the technology.

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