Commercial Paper Transaction Completed By International Banks Using Blockchain Platform Corda

Developed in the year 2008 Blockchain technology has demonstrated significant potential in bringing innovation in various financial areas. Even in its initial stages the technology has deranged many different business sectors and industries. The features of blockchain which make it very alluring for applications in business sectors and industries around the globe include decentralization, unalterable, and transparency. One sector in particular that is leading the venture in investigating the potential of the blockchain technology in the banking and finance industry.

Even though there are several hindrances in its development at present, but it can be said without a doubt that blockchain possesses the ability to renew the finance and banking sector by minimizing any possible costs and saving on labor.

On 6th December Finextra reported that R3, an enterprise blockchain software, partnered up with a group of international banks to successfully complete a live commercial paper transaction by utilizing a blockchain based platform named Corda.

R3 developed the Corda-based Euro Debt Solution application, which was used to implement the transaction with Germany based banking and financial services company named Commerzbank, French bank Natixis, and Dutch financial services firm named Rabobank as partakers in the transaction.

According to reports Natixis issued one hundred thousand euros, while Rabobank carried out the role of and investor and ING was both the escrow agent and dealer of the transaction. The prototype configuration, software and distributed ledger (DTL) network to set up trade, and formulate the instructions for the regulatory connotations were organized by Commerzbank.

The entire legal framework for the blockchain project was developed by collaborating with external counsel Allen and Overy. Marnix Bruning, who controlled the money and central bank sales at ING, was reported as saying that:

This live trade lays the foundation for dealing ECP more efficiently and cost effectively. It also marks the start of building an improved DLT platform that enables direct settlement and reduces operational risk and costs at the same time. At ING we look forward to our continued collaboration in taking this solution to the next phase.

Corda was initially released in 2016. It is a decentralized platform supported by Ethereum based blockchain technology, which is tailored for applications by financial institutions. The decentralized platform enables various businesses to develop interoperable blockchain networks that can carry out both private and direct transactions.

The applications of blockchain technology are being actively pursued by financial institutions worldwide. According to a press release from December 4, published by Itau, Brazil’s largest private bank collaborated with Standard Chartered, United Kingdom bank, to develop a platform based on the blockchain technology capable of handling small loans. Both of these entities successfully carried out a proof-of-concept (PoC) for the platform capable of handling small loans, based on Corda Connect which was created by blockchain startup R3 based in the United States.

The blockchain platform was tested by using $100 million, which were issued as a loan by Wells Fargo, a multinational financial services company based in the United States, along with Itau and Standard Chartered. The press release also mentioned that the points of the trail contract were completely negotiated while carrying out the experiment, and the compatibility of the document with the conditions formulated was then checked and signed at the end by the concerned parties.

According to the head of the treasury department at Itau, Ricardo Nuno, the blockchain technology greatly enhanced the level of communication between the banks, which normally consists of two thousand words for matter similar to this one. He also pointed out that the amount was not actually transferred, since the activity was an experiment, however the platform will certainly enable it in the future.

Also previously this week a Saudi Arabian developmental institution called the Islamic Developmental Bank Group (IsDB) in association with iFinTech Solutions, a Tunisian startup, is venturing to develop blockchain tools for incorporating into interbank matters. The objective the development of such tools in to improve the financial management and increase overall efficiency of various Islamic financial institutions.

IsDB has signed an agreement with iFinTech Solutions, which is a Tunis based startup describing itself as an “Investment Advisory Firm focused on alternative financial solutions based on Islamic principles.”

Regardless of the stern jurisdictions surrounding the banking sector, several financial institutions have begun to understand the potential that blockchain technology possesses owing to the popularity of multiple cryptocurrencies in the international markets. As blockchain technology enters the current age multiple problems regarding making our systems more transparent, easy to access and reliable can be solved through its application.

Hassaan Malik

Co-founder of BlockPublisher, Hassaan is a technologist at heart with a keen interest in blockchain, cryptos and traditional financial markets. Email: hassaan@blockpublisher.com, hassaanmalek@gmail.com

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