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Sberbank and telco MTS have implemented the first Russian issue of commercial bonds via smart contracts utilising a blockchain platform developed by National Settlement Depository.
Commercial bonds are unsecured fixed-income securities issued by a company and placed on an over-the-counter (OTC) market through a private subscription. In order to conduct the transaction, a complete Delivery versus Payment settlement model was reportedly implemented using blockchain technology, which made the transfer of the bonds and money simultaneous.
As part of the transaction, NSD implemented a full Delivery versus Payment (DVP) settlement model based on blockchain allowing it to transfer securities and funds simultaneously. The depository added an option to change the composition of network participants to work with a wider circle of investors, and updated the system to the newest version – Hyperledger Fabric.
All three parties received access to the blockchain platform to perform the transaction, which ensured transparency and confidentiality in dealing with the accounts, and met the requirements set forth by Russian law. Each participant of the deal could exchange documents online and track the transaction status in real time. Igor Bulantsev, Senior Vice President of Sberbank and Head 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.”
Eddie Astanin, Chairman of the Executive Board of the NSD, noted:
“In the first quarter of 2017, NSD began developing the prototype of the platform to conduct bond transactions. The Sberbank and MTS transaction was the first one which gave blockchain the status of an industrial technology which ensured confidentiality and accelerated securities settlements. Our final task is to create digital asset accounting infrastructure together with market leaders; the existence of the infrastructure is a crucial condition for institutional investors to enter our market and for the market’s successful development and increase in its capitalisation.”
He further added that the end goal of the agency is development of an infrastructure for recording digital assets in partnership with market leaders.
In December, Russia completed its first government-level blockchain implementation. Sberbank announced that it is partnering with Russia’s Federal Antimonopoly Service to implement document transfer and storage using blockchain technologies.
Earlier today, the Russian State Duma’s Committee for Legislative Work supported a bill “On Digital Financial Assets”, which was first prepared in March of this year. According to Pavel Krasheninnikov, head of the Legislative Work committee, the bill aims to “minimize the existing risks of using digital objects for transferring assets into an unregulated digital environment for legalization of criminal incomes, bankruptcy fraud or for sponsoring terrorist groups.”