National Settlement Depository (NSD), Russia’s central securities depository, Sberbank, Russia’s largest bank, and MTS, Russia’s telecommunications operator, have summed up the results of commercial bond placement using blockchain. The nominal value of MTS’ commercial bond issue – RUB 750 million (USD$11.3mn) – has been redeemed. Sberbank’s corporate investment business was the issue’s purchaser and the organizer. The case of the full life cycle of a security in the form of a set of smart contracts (from placement to the full performance of the issuer’s obligations to investors) has been successfully implemented.
Commercial bonds are debt instruments which are unsecured and are sold on the OTC market via private placement. As part of transaction preparation, it was implemented a full Delivery versus Payment (DVP) settlement model based on blockchain, allowing it to simultaneously transfer securities and funds. The option of a dynamic change in the composition of network participants was added as part of the transaction; it broadens the circle of investors that can be worked with.
NSD provided its own blockchain platform based on Hyperledger Fabric 1.1. to conduct the transaction. To perform the transaction, the issuer, the CSD, and an investor were granted access to the decentralized platform. The confidentiality of work with accounts was ensured, and Russian legislative specifics were taken into consideration.
“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. It has some advantages, and we will proactively develop it by creating infrastructure to record digital assets; the presence of such infrastructure is a crucial condition for attracting institutional investors to our market, as well as for the market’s dynamic development and the growth of its capitalization,” said Eddie Astanin, chairman at NSD.
“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,” added Andrei Shemetov, Vice President, Head of the Global Markets Department of Sberbank.