The Spanish bank BBVA has officially issued a loan through the Ethereum blockchain. As reported by Finance Magnates, BBVA, the second Spanish bank, is working on a pilot program that will issue loans using Ethereum (ETH). In the recently issued loan, the Spanish national electricity company, Red Electrica, received funding from BBVA.
This transaction represents the first use of the BBVA pilot program in the real world and was not a small test.
It is reported that the loan was valued at $ 150 million, although it is unclear how much was negotiated using ETH. BBVA also did not disclose which currency was used for transactions. The report also does not include whether it was ETH or something with less volatility, like a stablecoin.
The BBVA loan was what is called a syndicated loan. A syndicated loan is one that divides a borrower between multiple lenders. This allows the borrower to borrow larger amounts while at the same time reducing the risk by spreading the loan through several lenders.
In this case, the three credit institutions are BBVA, MUFG (Japan) and BNP Paribas (France), and all three banks have shown interest in the use of blockchain technology. Previously, MUFG (the fourth largest bank in the world) did research using its own cryptocurrency, while BNP was in talks to build its own blockchain.
The future of finance?
This example shows the advantages of using cryptocurrency compared to traditional systems. According to BBVA, the current loan system (estimated at 4.6 trillion euros) takes weeks to process transactions. The Ethereum transactions, on the other hand, can be completed within a few hours.
Blockchain technology was also considered an excellent way to store signatures and terms of the contract, with the timestamp of each block in which they were included. This means that ETH transactions can be referenced forever, when lenders or borrowers want to recheck the details of their loan. This could mean reduced costs and greater security for issuing loans:
Everything is automatically recorded by the system, in terms of back office and operating costs.