Russian Telco MTS, Sberbank Complete Blockchain-Based Commercial Bond Transaction

Blockchain | December 2, 2018 By:

The National Settlement Depository (NSD), Russia’s central securities depository, has announced the completion of a commercial bond transaction between MTS, a mobile network operator in Russia, and state-owned Russian bank Sberbank.

The commercial bond placement was first announced in May of this year when MTS said that it issued commercial bonds denominated in rubles using NSD’s Hyperledger Fabric-based blockchain platform. It involved placing commercial bonds in the amount of RUB 750 million ($12M USD) with a maturity of 182 days and an annual coupon rate of 6.8% on the over-the-counter (OTC) market. The primary bond buyer and the organizer was Sberbank CIB, Sberbank’s corporate investment business.

In an announcement posted on the NSD website, the securities depository said that the nominal value of MTS’ commercial bond issue has been redeemed, and 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.

“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 NSD said. “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. 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.”

Andrei Shemetov, Vice President, Head of the Global Markets Department of Sberbank, said that blockchain 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,” Shemetov said.

Eddie Astanin, Chairman of the Executive Board at NSD, said that the 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,” said Astanin. “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.”