- Commercial paper transaction processed in minutes rather than days thanks to blockchain technology
- Project is a major step toward fully blockchain-based securities trading
- Transaction used cash on ledger issued by Commerzbank (commercial bank cash on ledger)
- The first dematerialized transaction of money-market securities
Continental, Commerzbank and Siemens have carried out a transaction between the companies using blockchain technology. The transaction took place in January. It had a volume of €100,000 and a term of three days. Continental was the issuer of the money market security, which was in the form of a euro-denominated electronic commercial paper according to legal requirements stipulated in the Luxembourg law. Commerzbank provided the Corda-based blockchain platform through its research and development unit, Main Incubator, and acted as a service partner, issuing commercial bank cash on ledger to facilitate settlement. Siemens subscribed to the money market security as an investor. Corporate law firm GSK Stockmann provided legal advice on the transaction.
A regular securities transaction between two companies was used as a starting point. The companies not only generated the money market security, but also processed the trade (including payment processing) in a legally binding manner using blockchain.
“Blockchain made the process even quicker and more effective. Working with our project partners, Siemens and Commerzbank, we tested the feasibility of using blockchain in the Finance department and it proved to be a success. I’m proud of this pioneering achievement. We gained some new experience across various areas of our companies in both a technical and legal respect and also in terms of interlinking between the specialist departments.” – Stefan Scholz, head of Finance & Treasury at Continental
Peter Rathgeb, corporate treasurer at Siemens, added, “It was important for us to test this technology at an early stage and develop action points for the future. There are clear advantages of using this technology, including significantly shorter processing times and faster time to market. Some of the major challenges revolve around the security and performance aspects and the legal area, such as the importance of creating a consistent European understanding of the standards and legal points involved when it comes to blockchain-based transactions.”
“While markets and technologies are constantly changing, established relationships with customers remain an important asset. We are pleased to be assisting our customers with the process of digital transformation through transactions like these. Blockchain technology has tremendous potential in making capital market transactions quicker, more straightforward and more efficient for our customers,” said Roman Schmidt, Commerzbank’s divisional board member for capital markets.