The Spanish BBVA and two partner banks have completed the first syndicated loan on the blockchain, providing a working example of how transactions in the $ 4.6 tn market can be simplified and made faster by using technology that supports criptovalute.
Syndicated loans have been identified from the start as a key use for blockchain in financial services, as banks rely on outdated and inefficient processes, including faxes, to share information between different parties that are structuring complex agreements .
Combining shared databases and cryptography, blockchain technology is the basis for cryptocurrencies like bitcoins. Banks have leveraged technology, allowing multiple parties to have simultaneous access to a continuously updated digital ledger that can not be changed, as a way to reduce costs and accelerate many activities.
On Tuesday, BBVA used a private blockchain network to organize a $ 150 million syndicate loan for Red Electrica, the Spanish network operator, with MUFG co-financiers from Japan and BNP Paribas from France. Legal advisors Linklaters and Herbert Smith Freehills also had access to the system that allowed all parties to exchange information instantly.
The information was marked by the timestamp, to show exactly when each event occurred and the network was protected with user codes. Once the contract was signed, he was assigned a unique identifier registered on the Ethereum blockchain, preserving its authenticity.
BBVA states that blockchain technology, which is launched on a pilot basis, simplifies and accelerates the process of completing syndicated loans from about two weeks to a day or two. The signing of the loan and the processing of the documentation, which traditionally requires a few hours, can be done in a few minutes.
In addition to saving time, moving syndicated loans to the blockchain will also bring a "huge reduction in internal costs" to customers, told FT Ricardo Laiseca, head of global finance at BBVA. He said: "Everything is automatically recorded by the system, in terms of back office and operating costs".
Mr. Laiseca stated that BBVA had a "five or six" oil pipeline for other syndicated loans that would be made on the blockchain in the coming months as the pilot continues.
"We are offering these technologies for collaboration with any other bank … This is not just for BBVA, we believe it is a second phase (we are working on a new market infrastructure that will suit everyone".
Another platform created by the fintech group Finastra and NatWest pioneer in the United Kingdom offers blockchain syndicated loan services, using the Corda distributed accounting technology. In the broader loan area, BBVA at the beginning of this year issued the world's first corporate loan via blockchain.
The largest blockchain project in the banking sector remains the Interbank Information Network, where more than 75 banks led by JPMorgan, Royal Bank of Canada and ANZ use generalized accounting technology for some interbank payments.