Netherlands-based Rabobank announced that it has completed a series of pilots leveraging blockchain technology for commercial paper transactions to modernize banking processes.
The pilot used the Ubermorgen blockchain platform for issuance and built on previous work using emerging technologies in money markets. More than 2 billion euros ($2.1 billion) worth of commercial paper transactions were recorded during the pilot period, providing a glimpse into the potential of blockchain use in finance.
Commercial paper is a short-term debt instrument used for inventory, payroll, and accounts payable liabilities. Commercial paper, generally described as an unsecured promissory note, is collateralized by the issuing entity and repaid at maturity without the use of traditional collateral.
Rabobank says it has seen significant success in reducing payment risk for participants by using blockchain for pre-production transactions. Other perks include promises to:
Interoperability, third-party elimination, transparency, and massive transformation of banking processes.
The pilot that demonstrated blockchain’s suitability for short-term commercial paper trading was a collaboration with financial technology company TreasurySpring and two other large asset managers.
Ubermorgen’s blockchain solution leverages Bloomberg’s Trade Order Management Solutions (TOMS), Citi’s (NASDAQ: C) analytics platform Velocity, and banking messaging network SWIFT.
The latest initiative is not Rabobank’s first time utilizing the technology, with the Utrecht-based bank also running a blockchain pilot with Euroclear and Germany-based Commerzbank in 2021.
In 2022, Rabobank partnered with Euroclear and Northern Trust to pilot a blockchain-based commercial paper using R3’s Corda distributed ledger.
“Our new customers shared their enthusiasm for this new solution, which combines the best of both worlds: the speed and flexibility of distributed ledger technology and the reliability and compliance of centralized systems,” said Jacek Wieclawski, head of innovation at Rabobank. .
Changing the financial environment with blockchain
Blockchain has evolved from a niche technology to record several mainstream applications in the financial sector. Apart from the use cases of decentralized finance (DeFi) and digital currencies, traditional financial institutions are moving their tokenized securities to blockchain.
Tokenized bonds have recently received a significant boost, led by Hong Kong. International financial giants such as JPMorgan (NASDAQ: JPM) and HSBC (NASDAQ: HSBC) have tested the market with relatively successful blockchain-based payments, while others are exploring use cases in know-your-customer (KYC) and anti-money laundering (AML). You are exploring. process.
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