Commerzbank, a Germany based bank has duly acknowledged the capability of blockchain technology for money market trades.
Commerzbank along with Kfw Banking Group have jointly traded a Euro Commercial Paper issued by Kfw and simultaneously replicated the transaction in a blockchain using R3 Corda platform.
The security was sold to MEAG, the asset manager of Munich Re and ERGO without a payment agent or a clearing system.
This pilot transaction, valued at Euro 100,000 issuance volume with a five-day term was immediately posted compared to a standard two-day clearing period.
‘Blockchain technology holds significant potential’, says Roman Schmidt, Corporate Finance Director, Commerzbank.
Hailing the technology, he further concedes that the option of immediate securities settlement may offer significant advantages in terms of capital freedom and reducing the number of mediators required to process a transaction.
“The pilot transaction has demonstrated that the issuing as well as trading of securities can be simulated in real time via blockchain technology. Transforming securities transactions into digital issues may open up significant potential for efficiency gains.’, he added.
However, he also agreed that it will take another few years before the platform is ‘market ready’.
Innovations and adjustments to the regulatory and legal aspects and reporting interfaces will be needed to pave the way for the technology.