Erste and Asfinag team for blockchain-based capital markets tech project
Erste Group and Asfinag (an Austrian publicly owned corporation which plans, finances, builds, maintains and collects tolls for the Austrian autobahns) have conducted the first end-to-end digital issuance of a debt financing instrument in Europe via a blockchain platform.
The issuance of the €20 million Schuldscheindarlehen (SSD) by Asfinag was “successfully concluded” on Erste’s newly-developed platform, the two parties say.
The Austrian insurance companies Wiener Städtische Versicherung and Donau Versicherung and the Austrian regional bank Hypo Vorarlberg were among the investors which subscribed to the novel issuance.
“By applying blockchain technology to provide issuers and investors with improved efficiency, more transparency and a lower level of operational risk, the platform promises to make SSD and similar capital markets products more accessible and their handling more efficient, both for corporate issuers and for institutional investors,” Erste and Asfinag say.
Erste developed its digital issuance platform using Hyperledger Fabric, the Linux Foundation’s offering for enterprise blockchain platforms. The entire workflow involved in the issuance of the SSD was conducted on Erste’s permissioned blockchain platform, without the parallel implementation of the traditional process involving paper-based documentation and physical signatures.
The participants emphasises that they were able to carry out the entire issuance process – distribution, allocation and execution of the SSD agreement – “in an end-to-end digital manner”.
By applying blockchain technology, the tasks involved in the creation and execution of the transaction documentation, which usually takes several days to complete in the traditional paper-based process for SSD issuances, can now be resolved “in a matter of just a few seconds”.
Erste adds that it has structured the platform so that its open architecture would allow for the future integration of additional banks and platforms.
Erste was advised by Wolf Theiss on legal matters related to the novel use of a blockchain-based process for this issuance, while the consultancy d-fine provided the bank with advice on the design and implementation of the blockchain platform.
SSD is a well-established debt financing instrument in Europe, with an outstanding volume of more than €100 billion. While it is most popular in the German-speaking countries, the SSD market has become increasingly international over the past few years, with Polish, Hungarian and Czech firms among those making inaugural SSD issuances.
It has elements of both loans and bonds, as it involves a bilateral, unregistered and (generally) unrated loan agreement that is sold directly to institutional investors. SSDs cannot be listed.