Six months ago Russian telecoms company MTS issued a bond on the National Settlement Depository’s (NSD) blockchain. Russia’s largest bank, Sberbank, both organized and purchased the issue. Today the NSD announced that the RUB 750 million bond has been redeemed. Hence smart contracts were used for the full life cycle from placement to settlement.
The pilot used a full Delivery versus Payment (DVP) settlement model enabling the simultaneous transfer of the bond and funds.
The NSD developed the blockchain platform using Hyperledger Fabric 1.1. The Central Securities Depositary and the investor had access to the platform.
“NSD has already implemented a few successful cases based on blockchain, including the first IPO in the Bank of Russia’s regulatory sandbox, as well as the joint issuance of securities with the largest financial market players. We see that the technology is in demand,” said Eddie Astanin, Chairman of NSD.
Andrei Shemetov, VP, Head of the Global Markets Department of Sberbank was even more optimistic: “Blockchain may change the world the way Internet changed it. This technology is very important for the banking sector, because it allows for a cost reduction, a dramatic increase in the speed and safety of transactions, and provides an unprecedented level of trust and transparency in any transactions.”
“I am sure that our joint blockchain project with NSD and MTS is just the beginning, and in the next 5-10 years, blockchain-based products and services, including smart contracts on the basis of blockchain, will become a standard thing.”
Other blockchain loan projects
Four months ago the Commonwealth Bank of Australia announced it was arranging a blockchain bond for the World Bank. The Thai bond market has started to investigate blockchain.
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.
Finastra has launched a system for managing syndicated loans, but at this stage, it doesn’t do the whole life cycle. Symbiont is also working on a syndicated loan trading platform with Ipreo.