Russian Banking Giant Sberbank Conducts First Commercial Bond Deal on Blockchain
Sberbank has successfully accomplished the issuance of the first blockchain-based commercial bond transactions. In the official announcement, telecom giant MTS confirmed having placed commercial bonds worth RUB 750 million (approx. $12 million) on a blockchain network provided by National Settlement Depository (NSD) of Russia and is powered with smart contracts technology.
Sberbank confirmed that NSD’s blockchain platform is based on Hyperledger Fabric and enables a ‘complete securities lifecycle’ for the rouble-denominated commercial bond on the blockchain platform. The bank further revealed that the smart contract execution is a very transparent process wherein everything from ‘placement to the issuer’s performance of its obligations, including settlement in rubles’ was accomplished by the blockchain.
Commercial bonds are basically unsecured and fixed income securities issued by a company and placed on over-the-counter (OTC) market via a private subscription. The MTS commercial bonds were issues for a maturity period of six months and an annual coupon rate of 6.8 percent. The MTS announcement further noted that ‘The transaction was executed via DVP (Delivery versus payment) settlement assuming simultaneous movement of securities and money using blockchain, the immutable ledger for recording transactions.’
All three parties - Sberbank, MTS and NSD - will be having access to the blockchain platform to ensure proper transparency and confidentiality while dealing with accounts. Moreover, one can change the list of participants dynamically over time allowing the issuance of bonds to a large number of investors at a later stage. Each participant will be able to digitally exchange documents as well have a real-time tracking of the status of the transaction.
Igor Bulantsev, senior vice president and chief of Sberbank CIB said: “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.”
Eddi Astanin, Chairman of the Board, National Settlement Depository, commented “The pioneering transaction with Sberbank and MTS confirmed blockchain’s status as an efficient industrial technology providing confidentiality and speed during securities settlement. Our ultimate goal, in cooperation with market leaders, is to create an infrastructure for digital assets record, which is an important prerequisite to attract institutional investors, develop the market and accelerate growth in its capitalization.”