Last week China’s Zheshang Bank issued asset backed commercial paper (ABCP) where the assets were made up of receivables on its supply chain finance blockchain. ABCP is a new product approved by the China Interbank Market Dealers Association. It merges traditional commercial paper concepts with asset backed securities (ABS) and is particularly well suited to trade finance because of its short-term nature. The first ABCP issued by Zheshang Bank is for six months and 120 million Yuan ($17 million).
Almost two years ago, the bank issued a $68 million loan note, backed by blockchain trade finance assets.
“ABCP product characteristics and the concept of serving the real economy and SMEs are very consistent with the long-explored supply chain finance innovation of Zheshang Bank and the practice of supporting the industrial chain to coordinate the resumption of production,” said Shen Bin, of Zheshang Bank, speaking to China Banking and Insurance News.
The Zheshang Bank issuance is one of five ABCP pilot projects in the first batch, which is expected to total 3.324 billion Yuan ($470 million). Whereas Zheshang Bank’s assets are based on SME financing, many of the other ABCP pilots relate to large institutions and state banks, though the assets are not on blockchain. For example, CITIC Construction Investment Securities and China CITIC Bank are underwriting a coal supply chain and Anji Leasing (car leasing) is issuing an ABCP underwritten by state banks Agricultural Bank and Bank of China.
Numerous firms are using Zheshang Bank’s supply chain finance platform, including Real Can (Ruikang) Pharmaceuticals.
Meanwhile, around the world, there have been numerous commercial paper issuances using blockchain . They include from India’s YES BANK (now insolvent) and a consortium of EIB, Euroclear, Santander and EY. ID2S is a blockchain-based Central Securities Depository owned by Orange and Citi and is targeting commercial paper.