Blockchain Commercial Bonds Transaction Completed By Russian Depository

Blockchain, FinTech, Innovation, News, Regulation | December 29, 2017 By:

The National Settlement Depository of the Russian Federation (NSD) has successfully completed the country’s first transaction issuing commercial bonds based on blockchain technology.

In October, The NSD partnered with mobile network operator MegaFon and Raiffeisenbank Russia for the issuance and initial placement of the blockchain commercial bonds on the Russian market.

On December 22, the NSD said that a RUB 500 million (USD $9 million) commercial bond issue of MegaFon was paid off at par value. Raiffeisenbank was the organizer and buyer of the bond issue. A full life cycle of the security was successfully implemented, from placement to the full execution of the issuer’s obligations to the investor.

The transaction, which was carried out on NSD’s platform, generated great interest by issuers and investors in the new technology for accounting rights to securities. NSD said that interest in blockchain bond issues may reach RUB 10-15 billion (about USD $175 million-$250 million) next year.

The NSD system was designed to allow an issuer and an investor to receive access to a decentralized platform. It helped solve the issue of ensuring confidentiality when working with data on securities balances, and also took Russian legal specifics into account. According to the NSD, the system works only with digitalized assets, making the process for placing, circulating, and record-keeping for securities as transparent as possible. Each transaction participant is able to exchange documents online and monitor the process of making the transaction. Cryptographic protection and verification allow all operations to be conducted electronically.

NSD Executive Board Chairman Eddie Astanin said the issuance of MegaFon commercial bonds via NSD’s blockchain platform was a revolutionary event in the industry and attracted the interest of Russian issuers and their international partners in the post-trade sector. He added that they demonstrated that blockchain is able to serve as an industrial solution on the financial market.

MegaFon CFO Gevork Vermishyan stated that the placement of the bonds using blockchain technology allowed them to save time required to settle the transaction and to ensure the reliability of accounting for the issuer’s and investor’s rights.