Sberbank criticized the blockchain of the Central Bank of the Russian Federation

The largest bank in Russia, Central and Eastern Europe – Sberbank withdraws from participation in the Masterchain blockchain launched with the support of the Central Bank of the Russian Federation. This was stated by Oleg Abdrashitov, the head of the blockchain laboratories of the bank, complaining about the poor speed, low security and inefficiency of the platform.

As an alternative, Sberbank is considering Western corporate blockchain platforms Hyperledger Fabric from IMB and Quorum from JPMorgan.

“Masterchain” does not meet the requirements of Sberbank cases, so for all future research we will use corporate platforms, such as Hyperledger Fabric or Quorum, ”said Abdrashitov.

Representatives of Raiffeisenbank, which also participates in Masterchain, recently admitted that they are also investigating other corporate blockchain platforms, including HyperLedger Fabric, Corda from the R3 consortium, and its own Ethereum-based framework called R-chain.


.

Related:

  • No Related Posts

Russian Bank Sberbank to Seek Alternatives to ‘Inefficient’ Central Bank-Backed Masterchain

Sberbank, Russia’s largest lender, is to scale down its participation in Masterchain, a blockchain project led by the country’s central bank, calling it “ineffiecient, insecure and slow”.

Oleg Abdrashitov, head of Sberbank’s blockchain lab, told Coindesk the institution was winding down its participation in Masterchain and would seek opportunities using more widely-proven enterprize blockchain platforms.

Coindesk reported Abdrashitov as saying:

Masterchain does not satisfy the requirements for Sberbank’s use cases, so for all future exploration we will use enterprise blockchain platforms such as Hyperledger Fabric or Quorum.

Mortgage Bond Custody

By March 2017, Sberbank was in control of around half of Russia’s mortgage market reported Vedomosti, the press-service of the state-backed institution.

Indeed, the primary use case Sberbank intended for the enterprize platform was as a decentralized depository for digital mortgage bonds.

Such a use case could potentially save Sberbank millions of dollars a year by cutting out the National Settlement Depository, a Moscow-based exchange group and clearing facility that charges a small fee per mortgage bond it holds as custodian.

Masterchain Launch Delayed

The Masterchain trial use case started last autumn and was set to be deployed in August, but this launch date has been delayed as technical developments have slowed.

Masterchain was conceived from a fork in the Ethereum blockchain, and built according to laws regulating the use of cryptography, which is highly restricted in Russia. This means the system is highly centralized.

Abrashitov also told Coindesk the system was too “slow and insecure”, with a single mortgage bond taking three minutes to upload onto the Masterchain.

He said: “Business people are not used to dealing with something where you push a button and then you go take a break [until it works]. The leadership is looking at that and gets disappointed in the blockchain tech. We are spending shareholders’ money [on blockchain exploration]. We need solutions that are practical.

Abdrashitov also explained that the Masterchain blockchain was inefficient, making it impossible to use the platform for several purposes at the same time. So for every use case a new network would have to be built.

Further Options Considered

And so, the state-controlled bank said it was backing out gently. While it will continue to participate in the project, its role and expected usage of any end product will be limited and the company intends to seek alternative enterprize platforms, naming the likes of Hyperledger Fabric and Quorum.

Hyperledger Fabric was developed by Linux and IBM for the execution of smart contracts and meets the use cases required by Sberbank for functions such as over-the-counter trading, trade finance and mortgage lending.

Related:

  • No Related Posts

Russia’s Largest Bank Conducts $12 Billion Transaction Using Smart Contracts

Shunning blockchain and smart-contracts for years, financial institutions are finally waking up to the potential that decentralized technologies hold, with a flurry of government and corporate companies making moves into the sector.

Mammoth Transaction, Minimal Traction

According to an official release on May 16, 2018, Russia’s largest bank, Sberbank, recently utilized a Hyperledger Fabric-based smart-contract system to issued rouble-backed bonds for a transaction.

The development saw Sberbank CIB, the investment division of Sberbank, the National Settlement Depository (NSD), and MTS, a Russian telecom operator, come together to conduct a RUB 750 billion bond issue, equivalent to $12.15 billion.

Historically, the commercial bond market has been limited to exclusive players, with most bond exchanges occurring Over-The-Counter (OTC) instead of digitally. With this successful transaction, Russian authorities are undeniably appraising the use of a robust blockchain-based system, which can dispose of the traditional methods and arguably provide a faster, safer exchange system.

As per the report, the parties also tested a blockchain-based delivery versus payment settlement model, that allowed for the simultaneous transfer of money and securities.

Authorities Fully Impressed with Blockchain’s Potential

Using the latest version of the Hyperledger Fabric, the participants were able to fully track every detail of the transaction, from placement to the issuer’s performance of its obligations to investors, and finally, its settlement in roubles.

Hyperledger Sawtooth: Blockchain for the enterprise https://t.co/AtRC9uOXsn

— Hyperledger (@Hyperledger) May 17, 2018

Advertisement
advertisement

All parties, the investor, issuer, and depository were able to access the decentralized platform during the transaction. Additionally, the operation was conducted in full confidence and knowledge of Russia’s legal authorities, in line with current standards.

The parties noted the impressive features of using a blockchain system, particularly its wholly digital nature. In addition, the participants were pleased to track their transaction, exchange any required documents, and have a significantly faster bond exchange process.

Speaking about the development was Igor Bulantse, Senior Vice President of Sberbank CIB:

“This MTS bond issue not only allowed us to confirm the reliability, efficiency and secure nature of the blockchain platform and carry out complex structured transactions involving securities, but also demonstrated the potential that this technology has to develop Russia’s digital economy.”

Echoing his thoughts was Andrey Kamensky, Vice President of MTS, who praised the system’s speed, ease-of-use, and transparency. Additionally, Kamensky placed full-faith in smart contracts, and said that “MTS will continue using blockchain.”

Finally, the Chairman of Russia’s NSD, Eddie Astanin, added his views on the process:

“The deal with Sberbank and MTS was the first of its kind, and shows that blockchain is a mass-use technology that provides confidentiality and speed when working with securities.”

Astanin believes the transaction is a “vital step” towards the creation of blockchain-based systems for the financial markets.

With 145 million customers in 20 countries, Sberbank is undisputedly a major financial player, and its successful usage of a smart-contract system may prove to be the litmus test for many global developments to come.

Related:

Tel Aviv Stock Exchange Develops ‘First Of A Kind’ Blockchain Lending Platform

The Tel Aviv Stock Exchange (TASE) has developed a “first of a kind” blockchain-based securities lending platform, according to a press release May 16. The new platform was completed in partnership with Israeli fintech firm The Floor, global professional services company Accenture, and Intel.

The exchange will reportedly create one central platform called Blockchain Securities Lending (BSL), which aims to revolutionize the securities lending market in Israel “by enabling direct lending among all the major financial instruments.” The platform will be designed as a “one-stop-shop” for all operations with securities lending and provide access to larger securities volumes in shorter terms.

By employing blockchain, the TASE intends to profit from its advantages such as direct peer-to-peer transactions, smart contracts, and enhanced security.

The platform will be built on Hyperledger Sawtooth that utilizes Intel Software Guard Extensions (Intel® SGX) technology to encrypt transaction data. Accenture will be working on the development of smart contracts on the platform, which is one of Hyperledger Sawtooth’s major business attributes.

Rick Echevarria, Vice President of Software and Services Group at Intel, noted the significance of blockchain for the financial services market, saying that Intel “believes blockchain can transform business processes”, while Accenture is working on a solution that “accelerates blockchain adoption.”

The project will be deployed in a production environment after a successful implementation of initial Proof of Concept (PoC).

Major indices that trade on TASE are the T-35, the T-125, and the TA BlueTech Index. The exchange has a market capitalization of $212 bln.

Traditional financial institutions have begun to see the advantages blockchain can add to their business processes. Last month, Banco Bilbao Vizcaya Argentaria (BBVA) became the first global bank to issue a loan using blockchain technology. The bank conducted the entire loan process, from the negotiation of terms to the signing, on a mutually distributed ledger, claiming that it cut the negotiation time for the €75 mln loan from “days to hours”.

Recently, Sberbank CIB, the corporate and investment banking business of Russia’s largest bank Sberbank, conducted the first blockchain-based commercial bond transaction in Russia. Sberbank CIB organized the issue corporate bonds using smart contracts, while the transaction was carried out on the Hyperledger Fabric 1.1-based blockchain platform.

Related:

Russian Bank Completes Bond Blockchain Transaction

Sberbank, a state-owned Russian banking and financial services company headquartered in Moscow, and telecom firm MTS, the leading Russian telecommunications operator and digital service provider, announced that they successfully completed the country’s first commercial bond transaction using blockchain.

Russian Bank Executes Country’s First Commercial Bond Transaction

The transaction was carried out by Sberbank CIB, the corporate and investment banking business of Sberbank. The transaction was placed through a proprietary blockchain network system operated by the National Settlement Depository (NSD). It is based on Hyperledger Fabric 1.1, a project under the Hyperledger umbrella.

MTS placed commercial bonds of 750 million rubles (around $12.11 million) for sale, and the primary buyer was Sberbank CIB. The bonds involved in the blockchain transaction have a maturity period of 182 days with an annual coupon rate of 6.8 percent. The trade was privately placed on the OTC market.

The transaction was processed through the standard delivery against payment settlement system which works on simultaneous transfer of the money from the buyer and securities from the seller using the blockchain system. As per the MTS release, “The framework of the transaction was structured to include the possibility of a dynamic change in the composition of network participants in order to potentially open the issue to a wide range of investors.”

Andrey Kamensky, VP of finance, investments and M&A at MTS told CoinDesk, “The entire settlement chain, from security placement and cash receipt to fulfillment of all obligations to the investor.”

NSD, in collaboration with various Russian banks and other entities, has been working on the trials of its Hyperledger-based commercial bond trading platform since October 2017. Earlier phases of testing the blockchain-based transaction processing system involved Raiffeisenbank Russia purchasing $10 million worth of bonds over a mobile phone network. NSD had announced plans to launch its own cryptocurrencywallet last year. (For more, see Russia’s Central Depository Will Launch its Own Crypto Wallet.)

Eddi Astanin, chairman of the board at NSD, told CoinDesk, “The pioneering transaction with Sberbank and MTS confirmed blockchain’s status as an efficient industrial technology providing confidentiality and speed during securities settlement.”

Russian authorities and commercial entities have been experimenting with blockchain technology for long. Late last year, there were reports about the nation working on a national cryptocurrency. (See also, Russia Will Issue National Cryptocurrency ‘CryptoRuble’: Report.)

Earlier this year, it partnered with another oil-producing nation, Venezuela, which has also tried interesting experiments in adopting the blockchain technology. (See also, Venezuela and Russia Are Collaborating on Cryptocurrency.)

Earlier this week, another global investment bank HSBC declared that it has successfully made the world’s first global trade finance transaction using a blockchain system, indicating a global trend in embracing the blockchain technology. (For more, see HSBC Makes First Blockchain Trade Transaction.)

Related:

Sberbank Buys Commercial Bonds Issued Over Blockchain Platform

Russian bank Sberbank CIB and telecoms firm MTS have conducted what they say is the country’s first commercial bond transaction made using blockchain.

MTS announced Tuesday that it had placed commercial bonds of 750 million rubles ($12.11 million), with the primary buyer being Sberbank, using a proprietary blockchain platform provided by the National Settlement Depository (NSD) and based on Hyperledger Fabric 1.1.

The bonds issued have a maturity of 182 days with an annual coupon rate of 6.8 percent and were placed on OTC market, according to a press release. The transaction used the “delivery versus payment” (DVP) method of settlement and was compliant with Russian legislation, it adds.

Andrey Kamensky, VP of finance, investments and M&A at MTS, commented that the successful blockchain transaction was carried out through “the entire settlement chain, from security placement and cash receipt to fulfillment of all obligations to the investor.”

Kamensky added:

“MTS intends to continue employing blockchain-based solutions, primarily in financial markets, due to [the technology’s] clear advantages in increasing transaction transparency and the participants’ confidence, while substantially reducing transaction costs.”

As reported by CoinDesk, the NSD, the central depository for Russia’s largest securities exchange group, announced trials of its Hyperledger-based commercial bond trading platform in October 2017. At the time, Raiffeisenbank Russia had already tested the system with the purchase of $10 million-worth of bonds in a mobile phone network.

According to Eddi Astanin, chairman of the board at NSD: “The pioneering transaction with Sberbank and MTS confirmed blockchain’s status as an efficient industrial technology providing confidentiality and speed during securities settlement.”

Sberbank image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Related:

Sberbank and MTS issue Russia’s first commercial bond deal on NSD blockchain platform

Sberbank and MTS issue Russia’s first commercial bond deal on NSD blockchain platform 9405

Blockchain

May 17, 2018 at 11:33 AM

State-owned Russian banking and financial services company Sberbank and largest mobile operator in Russia, Mobile TeleSystems MTS have developed and conducted the first Russian issue of commercial bonds via smart contracts. The operation was carried out utilizing blockchain platform which was developed by National Settlement Depository (NDS). NDS’s technology is based on HyperLedger Fabric 1.1.

Sberbank CIB is organizing the issue of MTS corporate bonds with 6-month maturity term for a total amount of 750 million rubles (about $12 million).

The head of Sberbank CIB, Igor Bulantsev said, “Issuing MTS bonds has not only allowed us to confirm the reliability, efficiency, and safety of the blockchain-based platform for organizing and conducting complex structured securities transactions but also demonstrated the great potential of the technology for the development of Russia’s digital economy.”

As a part of this transaction, National Settlement Depository conducted a settlement model, a full Delivery versus Payment (DVP) settlement model which is based on the blockchain. DVP simultaneously allows transferring securities and funds. Also, to work with a big circle of investors they added an option for changing the composition of network participants. They even updated the system to the latest version called as Hyperledger Fabric.

The initiative ensures confidentiality for transactions between three parties, depositor, issuer, and the investor. Also, the parties involved in the transactions were allowed to exchange documents online and verify transactions status in real time. Full transactions and executions can be checked online by all the parties from placing securities and receiving funds.

NSD chairman, Eddie Astanin, said, “In the first quarter of 2017, NSD began developing the prototype of the platform to conduct bond transactions. The Sberbank and MTS transaction was the first one which gave blockchain the status of an industrial technology which ensured confidentiality and accelerated securities settlements. Our final task is to create digital asset accounting infrastructure together with market leaders; the existence of the infrastructure is a crucial condition for institutional investors to enter our market and for the market’s successful development and increase in its capitalization.”

Earlier this year Sberbank, the biggest lender in Russia, announced the launch of a lab that will work on blockchain projects.

Image source: Sberbank

Related

Related:

Sberbank Completes First Blockchain-Enabled Commercial Bonds Transaction in Russia

Sberbank CIB, the corporate and investment banking business of Russia’s largest bank Sberbank, conducted the first blockchain-based commercial bond transaction in Russia, according to a Sberbank announcement May 16. The transaction was completed in partnership with MTS, a leading Russian telecoms operator, and the National Settlement Depository (NSD).

Sberbank CIB organized the issue of MTS corporate bonds for the value of RUB 750 bln ($12 mln) with 6-month maturity, using smart contracts. The transaction was carried out on the Hyperledger Fabric 1.1-based blockchain platform provided by the NSD.

Commercial bonds are unsecured fixed-income securities issued by a company and placed on an over-the-counter (OTC) market through a private subscription. In order to conduct the transaction, a complete Delivery versus Payment settlement model was reportedly implemented using blockchain technology, which made the transfer of the bonds and money simultaneous.

All three parties received access to the blockchain platform to perform the transaction, which ensured transparency and confidentiality in dealing with the accounts, and met the requirements set forth by Russian law. Each participant of the deal could exchange documents online and track the transaction status in real time. Igor Bulantsev, Senior Vice President of Sberbank and Head of Sberbank CIB, said:

“This MTS bond issue not only allowed us to confirm the reliability, efficiency and secure nature of the blockchain platform and carry out complex structured transactions involving securities, but also demonstrated the potential that this technology has to develop Russia’s digital economy.”

Eddie Astanin, Chairman of the Executive Board of the NSD, noted:

“The NSD was one of the first organizations in Russia to adopt blockchain. We began working on a prototype platform for carrying out bond transactions in Q1 2017. The deal with Sberbank and MTS was the first of its kind, and shows that blockchain is a mass-use technology that provides confidentiality and speed when working with securities.”

He further added that the end goal of the agency is development of an infrastructure for recording digital assets in partnership with market leaders.

In December, Russia completed its first government-level blockchain implementation. Sberbank announced that it is partnering with Russia’s Federal Antimonopoly Service to implement document transfer and storage using blockchain technologies.

Earlier today, the Russian State Duma’s Committee for Legislative Work supported a bill “On Digital Financial Assets”, which was first prepared in March of this year. According to Pavel Krasheninnikov, head of the Legislative Work committee, the bill aims to “minimize the existing risks of using digital objects for transferring assets into an unregulated digital environment for legalization of criminal incomes, bankruptcy fraud or for sponsoring terrorist groups.”

Related:

Sberbank uses NSD blockchain platform to place MTS bonds

The National Settlement Depository allowed the parties to use its blockchain platform – based on Hyperledger Fabric 1.1 – to conduct the transaction.

Sberbank CIB, the corporate and investment banking business of Sberbank Rossii PAO (MCX:SBER), and Russian telecoms expert MTS, as well as the National Settlement Depository (NSD) have placed commercial rouble-denominated bonds using smart contracts.

Sberbank said that the NSD allowed the parties to use its blockchain platform – based on Hyperledger Fabric 1.1 – to carry out the transaction. The MTS bond issue, which is worth RUB 750 billion and has a maturity of six months, was organized by Sberbank CIB.

Before the transaction, a complete delivery-versus-payment settlement model was created using blockchain, which allows securities and money to be transferred simultaneously. The option to dynamically change the list of participants was added to secure work with a variety of investors. As a result, a complete securities lifecycle was carried out in using blockchain-based smart contracts – from placement to the issuer’s performance of its obligations to investors, including settlement in Russian roubles.

The issuer, the central depository and the investor received access to the decentralised platform to carry out the transaction.

The bond placement, circulation and record keeping process is highly transparent as the system only operates using digitalized assets, the bank explained in its announcement. Each participant can exchange documents online and track the status of the transaction. Settlements are carried out in the ledger system, which considerably speeds up the transaction. The cryptographic protection scheme allows all operations to be carried out electronically using the electronic signatures held by clients of Moscow Exchange Group. The source code of the smart contracts can be found on Github and is publically available in compliance with the Hyperledger project, in which Sberbank and the Moscow Exchange Group have participated since 2016.

This is not the first time when Sberbank ventures into a blockchain project. In November last year, Sberbank’s First Deputy Chairman of the Executive Board. Lev A. Khasis told TASS that the bank is cooperating with the Russian Federal Antimonopoly Service (FAS) on a distributed ledger technology (DLT) project.

Back then, Mr Khasis said that the practical implementation is delayed due to unsolved matters such as the slow interaction of blockchain participants. He forecast, however, that DLT solutions will be able to compete with traditional ones not earlier than in two or three years. He also mentioned that the bank was working on a number of blockchain projects.

In January this year, Sberbank announced the establishment of a blockchain laboratory. The laboratory will test blockchain technologies and will develop blockchain-based solutions. It will also aim to create product prototypes, carry out pilot projects, and implement applied business solutions for Sberbank.

The blockchain laboratory will interact with Sberbank’s other laboratories and will offer its competencies to other market participants through cooperation with start-ups, associations, communities, and alliances. In terms of marketing, the laboratory aims to popularize blockchain and to provide assistance in the preparation of educational programs in this area.

Related:

Sberbank CIB And MTS Issue First Russian Bonds Via Smart Contracts Based On NSD’s …

MTS, Russia’s leading telecommunications operator, Sberbank CIB, Sberbank’s corporate investment business, and National Settlement Depository (NSD), Russia’s central securities depository, for the first time in Russia have placed commercial bonds denominated in rubles and based on blockchain with the full life cycle of a security in the form of a set of smart contracts – from placement to the full performance of the issuer’s obligations to investors.

To process the transaction, National Settlement Depository provided its own blockchain platform based on Hyperledger Fabric 1.1. Sberbank CIB was the organizer and main buyer of the issue of MTS bonds with a 6-month maturity term for a total sum of RUB 750 million.

Commercial bonds are debt instruments which are unsecured and sold on the OTC market via private placement. As part of the transaction preparation, NSD implemented a full Delivery versus Payment (DVP) settlement model based on blockchain allowing it to transfer securities and funds simultaneously. NSD added an option to change the composition of network participants to work with a wider circle of investors, and updated the system to the newest version – Hyperledger Fabric.

To perform a transaction, the issuer, the CSD, and an investor were granted access to the decentralized platform. The confidentiality of work with accounts was ensured, and Russian legislative specifics were taken into consideration.

The system processes only digitalized assets, making the process of placing, circulating, and record keeping securities highly transparent. Each party to the transaction can exchange documents online and follow the transactions’ status. Settlements are conducted directly in the record keeping system, and this accelerates the process of concluding the transaction. The selected cryptographic protection scheme let all operations be conducted electronically using the signatures of the Moscow Exchange Group’s clients. The source code of smart contracts is available at https://github.com/altoros/nsd-commercial-paper/; it is open in accordance with the requirements of the Hyperledger project in which Sberbank and the Moscow Exchange Group have been participating since 2016.

Eddie Astanin, Chairman of the Executive Board, National Settlement Depository, pointed out: “NSD was one of first Russian companies which were interested in blockchain. In the first quarter of 2017, NSD began developing the prototype of the platform to conduct bond transactions. The Sberbank and MTS transaction was the first one which gave blockchain the status of an industrial technology which ensured confidentiality and accelerated securities settlements. Our final task is to create digital asset accounting infrastructure together with market leaders; the existence of the infrastructure is a crucial condition for institutional investors to enter our market and for the market’s successful development and increase in its capitalization.”

Igor Bulantsev, Senior Vice President of Sberbank, Head of Sberbank CIB, said: “Sberbank is Russia’s leader in the implementation of technological and digital innovations in the financial sector. Issuing MTS bonds has not only allowed us to confirm the reliability, efficiency and safety of the blockchain-based platform for organizing and conducting complex structured securities transactions, but also demonstrated the great potential of the technology for the development of Russia’s digital economy.”

Andrey Kamensky, Vice President, Finance, Investments and M&A, MTS, added: “MTS is testing and implementing new technologies in all its business areas, including corporate finance and FinTech spheres. We set a task to accelerate the process of putting innovative solutions into operation after the test phase. With our partners’ assistance we have successfully implemented the first Russian issue of commercial bonds via smart contracts based on blockchain in the entire settlement chain – from placing securities and receiving funds to the full execution of the issuer’s obligations to investors. MTS will continue to use the blockchain technology, first and foremost, on financial markets, as it helps to improve the transparency of transactions, to build trust with transaction participants, and to reduce costs of operations.”

Related:

  • No Related Posts