Shunning blockchain and smart-contracts for years, financial institutions are finally waking up to the potential that decentralized technologies hold, with a flurry of government and corporate companies making moves into the sector.
Mammoth Transaction, Minimal Traction
According to an official release on May 16, 2018, Russia’s largest bank, Sberbank, recently utilized a Hyperledger Fabric-based smart-contract system to issued rouble-backed bonds for a transaction.
The development saw Sberbank CIB, the investment division of Sberbank, the National Settlement Depository (NSD), and MTS, a Russian telecom operator, come together to conduct a RUB 750 billion bond issue, equivalent to $12.15 billion.
Historically, the commercial bond market has been limited to exclusive players, with most bond exchanges occurring Over-The-Counter (OTC) instead of digitally. With this successful transaction, Russian authorities are undeniably appraising the use of a robust blockchain-based system, which can dispose of the traditional methods and arguably provide a faster, safer exchange system.
As per the report, the parties also tested a blockchain-based delivery versus payment settlement model, that allowed for the simultaneous transfer of money and securities.
Authorities Fully Impressed with Blockchain’s Potential
Using the latest version of the Hyperledger Fabric, the participants were able to fully track every detail of the transaction, from placement to the issuer’s performance of its obligations to investors, and finally, its settlement in roubles.
Hyperledger Sawtooth: Blockchain for the enterprise https://t.co/AtRC9uOXsn
— Hyperledger (@Hyperledger) May 17, 2018
All parties, the investor, issuer, and depository were able to access the decentralized platform during the transaction. Additionally, the operation was conducted in full confidence and knowledge of Russia’s legal authorities, in line with current standards.
The parties noted the impressive features of using a blockchain system, particularly its wholly digital nature. In addition, the participants were pleased to track their transaction, exchange any required documents, and have a significantly faster bond exchange process.
Speaking about the development was Igor Bulantse, Senior Vice President of Sberbank CIB:
“This MTS bond issue not only allowed us to confirm the reliability, efficiency and secure nature of the blockchain platform and carry out complex structured transactions involving securities, but also demonstrated the potential that this technology has to develop Russia’s digital economy.”
Echoing his thoughts was Andrey Kamensky, Vice President of MTS, who praised the system’s speed, ease-of-use, and transparency. Additionally, Kamensky placed full-faith in smart contracts, and said that “MTS will continue using blockchain.”
Finally, the Chairman of Russia’s NSD, Eddie Astanin, added his views on the process:
“The deal with Sberbank and MTS was the first of its kind, and shows that blockchain is a mass-use technology that provides confidentiality and speed when working with securities.”
Astanin believes the transaction is a “vital step” towards the creation of blockchain-based systems for the financial markets.
With 145 million customers in 20 countries, Sberbank is undisputedly a major financial player, and its successful usage of a smart-contract system may prove to be the litmus test for many global developments to come.