RabobankĀ used blockchain to issue ā¬40 million in one-week maturity euro commercial paper across 19 pilot transactions.Ā
With rising interest rates, blockchain is coming to the fore to empower shorter settlement times, enabling intraday transactions and hence improving liquidity.
The commercial paper, denominated in euros and pounds, was issued by the Dutch State Treasury, Rabobank Treasury and Austriaās Erste Bank, with Northern Trust Asset Management as the investor.
Rather than taking two days, the issuance, distribution and settlement took under 30 minutes and cost less than the conventional process. Liquidity was enabled on both the primary and secondary markets.
āBlockchainās reputation as a technology with legitimate applications for global financial markets has undoubtedly been shaken by the turmoil surrounding cryptocurrencies,ā said Roland van der Vorst, Global Head of Wholesale & Rural Innovation at Rabobank.Ā
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āThe scale and success of our pilot, delivered in partnership with some of the biggest financial institutions in Europe, will hopefully help to address misconceptions and show the revolutionary impact innovation in this space can truly have.ā
š„Rabobank developed the platform based on R3ās enterprise blockchain Cordaš„, which was also used inĀ pilots last year.Ā
However, the commercial paper is not blockchain native. It is a conventional security that is issued in Euroclear Bankās infrastructure with the primary difference that it settles instantly.
The solution is integrated with legacy systems, including for risk, with the Netherlands Authority for Financial Markets having access to the blockchain for supervision.Ā
āWe believe the digitisation of money markets can enhance liquidity and transparency at a critical time for the asset management industry. Our 2021 pilot was all about proof of concept,ā said Youssef el Mir, Global Head of Trading at Rabobank.Ā
āThese latest transactions and the solution weāve worked collaboratively to deliver prove that blockchain technology can be smoothly and seamlessly integrated in financial institutionsā legacy systems with the right approach.ā
Commercial paper is one tool for short-term banking liquidity with others including repo and trading liquid securities.Ā JP MorganĀ andĀ BroadridgeĀ are using blockchain for separate intraday repo solutions.Ā HQLAXĀ uses distributed ledger to enable assets to be traded intraday that would usually take two days to settle. AndĀ FinteumĀ is a start-up that plans to launch intraday FX swaps and repo.