The world’s first blockchain corporate loan has been processed
The €75 million loan was completed on a Hyperledger-based internal system and registered on Ethereum.
The BBVA financial group has successfully completed the first end-to-end blockchain-based global corporate loan, it announced on Thursday. The €75 million loan was extended to the Indra tech company.
It's notable for being the first loan processed entirely end to end on distributed ledger technology (DLT), and may serve as convincing proof of concept for other large scale financiers.
"The current process of contracting corporate loans is long and complex with various interactions between the bank and client, with numerous time-intensive iterations and reviews needed," the announcement explains. "This pilot addressed the complete process from negotiation up to the signing of the loan. This is an example of how BBVA is incorporating the opportunities presented by blockchain technology to arm its key products with greater agility and transparency."
"Blockchain technology can make important improvements to this process as is demonstrated by this pilot. On one hand, DLT technology guarantees transparency and traceability of the contracting process: both Indra and BBVA were able to independently consult the status of the transaction at every stage thanks to blockchain’s traceability feature. Additionally, the solution also digitized the negotiation process, which improved the management time, reducing it from days to hours."
The ability to quickly access reliable information, and automate many of the processes involved in going over it, is one of the reasons DLT is expected to be especially useful to lenders and borrowers.
"The use of blockchain in this transaction has greatly increased transparency and speed, while equally improving efficiency – it's a win win for both us and Indra," said BBVA global head of customer solutions Derek White.
Other groups have noticed the same, and are also moving in similar directions. For example, the VeChain cryptocurrency has partnered with tech-focused commercial mortgage provider Fanghuwang to explore similar processes. Its pilots have shown similar results, cutting costs along the way and reducing the average approval time from days and weeks to just hours.
This can bring direct cost benefits too, allowing lenders to extend more competitive terms to prospective clients.
This loan is also a significant development in that it combines elements of both public and private ledgers. Data was handled on an internally-developed Hyperledger-based blockchain system, before being immutably registered on the Ethereum public network. This might highlight the benefits of combining semi-public semi-private DLT systems in the future.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO
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