How Russia’s largest bank used blockchain technology to buy debts

The blockchain scene in Russia is growing all the time, with bigger and bigger players making use of the technology. Sberbank, the largest Russian bank, has successfully used blockchain technology to close a $15 million transaction with Trafigura, the third-largest physical commodities trading group worldwide.

Sberbank bought accounts receivable in a pilot transaction supported by the Hyperledger Fabric platform. The bank’s first deputy chairman Alexander Vedyakhin revealed the news during the Eastern Economic Forum in Vladivostok, Russia. The technical details were made public soon after the announcement.

Russian blockchain initiatives appear to be thriving thanks to an increased interest in the technology by most of the country’s large organisations as well as government agencies. However, the Russian government continues to remain somewhat guarded when it comes to cryptocurrencies.

$15 million worth of accounts receivable

The details of the pilot transaction weren’t kept under wraps for too long. The Singapore-based giant Trafigura sold $15 million worth of accounts payable to Sberbank. The debt belongs to one of Trafigura’s clients from Turkey.

The transaction was concluded through the blockchain-based platform Hyperledger Fabric. Sberbank took advantage of Fabric’s ability to segment data and maintain the confidentiality of certain parts of the network.

On the surface, the transaction may seem like just another typical financial agreement. But this is a significant milestone for the blockchain industry. It shows how smart contracts and blockchain technology can speed up international transfers. It also provides proof that businesses can benefit from blockchain in real-life scenarios.

This particular Russian blockchain project developed by Sberbank is a system that uses the Aurelia framework and the Scala language to write smart contracts. The bank also piloted a system that enables the validation of new blocks of complete transactions in one second.

Sberbank also owns a cloud-based solution that complements the system, called SberCloud.

‘From one day to one hour’

The transaction between Sberbank and Trafigura was completed through a smart contract hard-coded onto the blockchain. This type of transaction shows how efficient blockchain technology can be for international trading.

Vedyakhin stated that the new initiative by Sberbank had increased the efficiency of document flows and completed the transaction in one hour instead of one day.

According to the chairman, the pilot transaction between Sberbank and Trafigura could even redefine global trade. He stated:

“Our blockchain pilot project records every step of the transaction: request for the purchase of receivables, application processing and its approval with the bank, issuing the bank’s offer, confirmation of terms by Trafigura, and settlement of the transaction.”

A Trafigura spokesperson confirmed that the transaction was completed without any friction. The two companies are now planning to collaborate and use blockchain technology for other use cases.

The Russian blockchain ecosystem

Russia’s largest bank placed a bet on blockchain, and the investment seems to be paying off. The Russia blockchain ecosystem proves that this technology is no longer something of the future, but a viable solution to today’s challenges.

Using smart contracts to buy debts isn’t the first time Sberbank’s team of developers has used the blockchain for global trading either. Last year, Hyperledger Fabric was used to complete an off-exchange repurchase agreement deal between Sberbank and Interros, a Russian investment company.

Russia’s largest bank has quite a history with blockchain technology, in fact. Last year, Sberbank claimed to be the first to complete a three-way repo deal using smart contracts and blockchain.

Besides speeding up transaction times, blockchain technology also reduces working hours for each transaction as well as the risks that come with international transfers. With all these advantages, Russia’s largest bank has decided to expand to other partners willing to use blockchain for transactions.

Russia is getting more interested in blockchain technology

Despite its unclear stance on cryptocurrencies, Russia isn’t missing a chance to dive into blockchain applications. From large businesses to government agencies, there are many stakeholders interested in blockchain technology and its disruptive features.

The Russian central bank, for instance, backs the Fintech Association, an organisation of which Sberbank is a member. The consortium functions on an Ethereum-based network and aims to study and implement distributed ledger technology to come up with practical solutions within the industry.

Sberbank was also part of the Russian project Masterchain, although it dropped out after the project failed to meet expectations. Sberbank’s lab has focused on its own projects instead, with significantly better results.

The post How Russia’s largest bank used blockchain technology to buy debts appeared first on Coin Rivet.

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Russia’s Largest Bank Completes $15 Million Debt Purchase Via Hyperledger Blockchain

Using the Hyperledger Blockckhain, Russia’s Sberbank has successfully bought around $15 million worth of accounts as receivable from Singaporean commodity trading firm, Trafigura. According to a spokesperson for the largest bank in Russia, the purchase was completed using Hyperledger Fabric’s private collections feature, which allows some certain information remain private even with a network which has other members.

Furthermore, the Sberbank-driven framework through which the transaction was carried was done using smart contracts already programmed with the Scala general purpose language. The software is also powered by the Aurelia framework as well as SberCloud’s cloud service developed and deployed by Sberbank itself. The company boasts that it only takes one second to complete a full block of transactions on its platform.

The conclusion of the transaction was done a few days ago at the Eastern Economic Forum in Russia’s Vladivostok Pacific port city. Speaking on the transaction, Sberbank’s first deputy chairman, Alexander Vedyakhin, said that the system significantly reduced the amount of required time to complete the transaction by making the exchange of documents a lot more seamless. Vedyakhin said:

“Our blockchain pilot project records every step of the transaction: request for purchase of receivables, application processing and its approval with the bank, issuing the bank’s offer, confirmation of terms by Trafigura, and settlement of the transaction.”

Because of the success of this transaction, both Trafigura and Sberbank are currently making plans to find more ways through which blockchain technology can significantly improve financial transactions and processes worldwide.

Image Credits: Pixabay

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Sberbank Bank Buys $15M In Debt In Pilot From Trafigura Trading Giant Using Hyperledger’s Fabric

Sberbank, known as the largest banking institution in Russia, recently used blockchaintechnology to buy around $15 million USD worth of debt in accounts receivable from Trafigura, a commodity trader based in Singapore.

This transaction was made using the technology of Hyperledger Fabric platform. The announcement was made this week by the bank and a spokesperson confirmed that this tech provides several advantages for companies that want to trade internationally.

With the private collections feature of the technology, the company was able to keep a part of the data confidential between some of the participants. The system use smart contracts written with a Scala programming language and the Aurelia framework. SberCloud, the cloud solution of the bank, was also used at the time.

According to Alexander Vedyakhin, the deputy chairman of the Russian bank, the blockchain technology was very helpful in making the document flow considerably more efficient than it was before. Something that could take up to a day to do before is now done in an hour.

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He also confirmed that the pilot project was very useful because all the steps were fully recorded, so the process could be followed and reviewed all along the way.

This is yet another example of how blockchainhas been useful for the financial market. The spokesperson of the bank confirmed that this technology represents an ongoing evolution in the market and that more advanced solutions are set to be used soon.

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Russia’s Largest Bank Buys $15 Million in Debt Using Hyperledger Blockchain

Sberbank, the largest bank in Russia, has bought about $15 million worth of accounts receivable from the Singapore-based commodity trading giant Trafigura using a blockchain.

The pilot transaction was made on the Hyperledger Fabric platform, a spokesperson for the bank said. It took advantage of Fabric’s private collections feature, which can keep a certain set of data confidential among a subset of network participants.

The system piloted by Sberbank leverages smart contracts written in the Scala language, using the Aurelia framework and Sberbank’s own cloud solution, SberCloud. It takes one second to form a block of complete transactions, the company claimed.

The deal was revealed last week during the Eastern Economic Forum in Vladivostok, Russia, by Sberbank’s first deputy chairman Alexander Vedyakhin, but the size and technical details were not made public at the time.

The receivables acquired by Sberbank were owed to Trafigura by a large client from Turkey.

In his press statement, Vedyakhin said the technology helped make document flow more efficient, reducing the time needed to complete a deal “from one day to one hour.”

“Our blockchain pilot project records every step of the transaction: request for purchase of receivables, application processing and its approval with the bank, issuing the bank’s offer, confirmation of terms by Trafigura, and settlement of the transaction,” Vedyakhin said.

‘Ongoing evolution’

The pilot showed how far blockchain tech has come and its value to businesses, Sberbank said.

“What we see in 2019, and in this pilot in particular, is an ongoing evolution of this tech, from a promising but not yet developed technology into a more advanced and mature solution ready to live up to its initial disruptive image,” the bank’s spokesperson said, adding that Sberbank and Trafigura are considering expanding the use of blockchain in global trade finance.

A Trafigura spokesperson told CoinDesk that “the transaction flowed seamlessly between Sberbank and Trafigura,” and the two companies are discussing how they can use the tech for other use cases.

Sberbank’s blockchain lab previously used Hyperledger Fabric while investigating the opportunities of distributed ledgers: in November, the bank completed an off-exchange repurchase agreement deal with the Cyprus branch of the Russian investment company Interros.

In 2017, Sberbank launched another pilot, in which a payment involving the Russian companies MegaFon, MegaLabs and Alfa-Bank was recorded on a distributed ledger using Fabric.

Sberbank is also a member of the Fintech Association, a consortium backed by the Russian central bank that’s working on ethereum-based enterprise platform dubbed Masterchain.

Sberbank image via Shutterstock

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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.


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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.

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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

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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.

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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.

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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.)

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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

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