Richest Man in Russia Launches Token Trading Platform Atomyze Testnet On IBM’s Hyperledger …

Russia’s wealthiest man – Vladimir Potanin – has made progress towards the launch of a blockchain-based commodities and assets platform.

As a matter of fact, the venture – called Atomyze – launched in test mode today. The smelting and mining firm Nornickel, which also belongs to Potanin, will have its assets be the very first to be tokenized and featured.

These tokens will enable rapid transactions while enabling surplus supply trading, which will streamline interactions between businesses and customers.

Atomyze Based on IBM’s Hyperledger Fabric

Based on IBM’s Hyperledger Fabric blockchain technology, Atomyze will have Traxys, Trafigura and Umicore, all partners of Nornickel, at its launch.

Invites for these companies’ participation have been sent. Potanin gave an interview to Bloomberg, announcing that his other businesses will undergo tokenization to feature on the platform in the foreseeable future.

Crypto Tokens to Account for One-Fifth of Nornickel’s Sales

Potanin estimated that crypto tokens will end up accounting for a fifth of Nornickel’s assets. Nornickel is currently the largest producer of refined nickel and palladium in the world.

To begin, the first tokens to be tested will be backed by copper, cobalt, and palladium.

The platform will trade tokens backed by metals for physical supplies. While companies with a surplus from the contract volumes with Nornickle will be able to trade these with other parties.

In order to include the billionaire’s other businesses, Atomyze will have to obtain central bank approval. After being given approval from the central bank to include a user base with his platform, Potanin had this to say:

“To some extent, Russia appears [to be] ahead of many other jurisdictions in terms of digitalization.”

Atomyze – Available Only to Businesses Outside Russia

Outside Russia, Atomyze will be available only to businesses in Switzerland and the US. The venture is currently awaiting the finalization of the Russian digital financial assets law.

Potanin expects his platform to launch by the end of 2020. Nornickel partnered up with IBM in order to launch an educational program for developers who want to create digital tech for the metals and mining industries.

Alukoenigstahl, the Austrian steel trading company, is also working on its own blockchain-based Steel Smart trading data system.

Related:

Meet the Russian Oligarch Launching a Metal-Backed Crypto Token

The Takeaway

  • Norilsk Nickel, a Russia-based metal company, is launching a palladium-backed token and an exchange for tokenized commodities.
  • CEO Vladimir Potanin, one of the richest industrialists in Russia, told CoinDesk about the project in an exclusive interview.
  • The token is based on Hyperledger Fabric and developed with the support of IBM, Potanin says.
  • Norilsk Nickel is reaching out to a broad range of regulators, setting up entities in Switzerland and the U.S. and starting a pilot with Russia’s central bank, Potanin says.

Vladimir Potanin is used to dealing in hard realities.

The billionaire oligarch started his business empire in the Wild East days of the 1990s, when the assets of the old Soviet Union were up for grabs and opportunistic entrepreneurs could make mega-roubles if they were in the right place at the right time.

The son of a foreign trade official, Potanin authored the infamous loans-to-shares program that allowed a group of businessmen to buy Russia’s key industrial entities cheaply, later becoming the richest people in the country. He went on to build Norilsk Nickel (Nornickel), one of the world’s largest producers of palladium and refined nickel.

Potanin’s wealth is made of metal. But last week, sitting in a luxury New York hotel, his mind was on more immaterial things – like digitized tokens and distributed ledgers.

Looking relaxed in a polo shirt and blazer, Potanin, now 58, discussed how to represent metals as digital assets (built with IBM), streamline his business with distributed databases (built on Hyperledger), and give investors new ways to participate in his business. He wants to get more Russian enterprises thinking about how to use blockchain technology.

Lead from Vitalik

Potanin’s curiosity for blockchain technology partly originated from listening to Vitalik Buterin, ethereum’s creator, the billionaire said.

A curious detail: an avid ice hockey player who is known for playing with Russian President Vladimir Putin in amateur games, Potanin once invested in a hockey analytics startup founded by a friend of Buterin’s father.

While Potanin hasn’t met Buterin in person, he heard Vitalik speak about blockchain and was intrigued, he said:

“The knowledge of what he is doing and what he has achieved, of course, encouraged me that the young generation is moving in that direction. [I thought] I should be aware of what they’re doing and why, and I should benefit from this experience.”

After learning more about blockchain he reasoned that Nornickel could benefit from adopting its principles, for instance using distributed databases for managing internet-of-things data from his smelting operations.

At the same time, Nornickel is also issuing its own token, providing a new, more flexible way of managing sales contracts, Potanin says, and a new way for investors to participate in the company’s operations in Northern Siberia.

Palladium coins

“We are trying to digitize all our sales contracts because it looks more efficient, transaction costs are lower and it adds flexibility for our clients,” Potanin said. Sometimes Nornickel’s clients, like auto companies, might order too much palladium and need to renegotiate their contracts and buy less than they initially ordered. He says that’s easier to manage if the contract is tokenized.

“If you don’t need a certain amount of material you can split a token in parts and sell it to other clients. And for us, nothing changes: we ship palladium and clients get as much as they need.”

The tokens will be backed either by Nornickel’s guarantee to ship the actual tons of metal or by special metal accounts in a bank if a buyer doesn’t need palladium itself, Potanin adds.

This summer, the company joined Hyperledger, a blockchain consortium led by the Linux Foundation. The token is built on Hyperledger Fabric and supported by IBM. (The tech giant was not able to respond to requests for comment by press time).

Nornickel is also planning to launch a marketplace where its token and similar asset-backed tokens issued by other companies would be traded. Potanin says the palladium token will be available not only to funds and asset managers but also to retail investors:

“For example, you see palladium is going up, but you can’t go to Norilsk Nickel and buy palladium for several million dollars,” Potanin said. “Say, you have $500 in your pocket, and you want to bet on the price of palladium. You enter our platform and get a little portion of palladium in a tokenized form.”

Not everyone wants to buy into a company when what they really want is exposure to an underlying commodity, Potanin said:

“Exposure to Norilsk Nickel is an exposure to Russia, to mining, to rouble, to executive management of Norilsk Nickel and other entities. Some people like this because the stock of Norilsk Nickel goes up. But some people just don’t have expertise to evaluate it.”

He used a real estate analogy: “If you want to buy a flat you don’t want to buy a share in the construction company.”

Asset-backed tokens can be especially attractive for traditional businesses as they may attract money from crypto investors, Potanin said.

“It’s an interesting source of capital with very low transaction costs,” he said. “It might be an interesting way to finance working capital.”

Preston Byrne, a lawyer and astute observer of the blockchain and cryptocurrency fields, believes there will be demand for the kind of commodity speculation Nornickel is enabling with its tokenized palladium.

“If you’re buying palladium in a vault versus buying shares in Norilsk Nickel, those are different assets with different risk,” Byrne said. “Especially if palladium is stored in Switzerland instead of Russia where you have seen the extraction of oligarchs if they run afoul of the regime.”

Jurisdiction bets

Nornickel is preparing to launch the token using entities the company is setting up in the U.S. and Switzerland.

“We decided not to take any reputational risks and to be 100 percent regulated,” Potanin explains. “We’re making sure we’re in alliance with the regulators of both countries. We will need both the U.S. regulators’ decision and FINMA’s approval in Switzerland to launch.”

What’s more, Potantin’s plans go beyond metals.

In Russia, Nornickel is in “very advanced discussions” with the central bank to launch a pilot project to tokenize other goods, from airplane tickets to shipping containers. (The Bank of Russia did not respond to a request for comment by press time).

Potanin helped write the legislation for digital assets in Russia as a member of a blockchain working group within the Russian Union of Industrialists and Entrepreneurs, a lobbying group formed by the country’s largest industrial players.

The bill is making its way through Russia’s parliament and Potanin is confident it will pass.

“I hope it will go through the parliament without delay, and I understand that I can start my experiment in Norilsk with the frame of this legislation and under the control of our regulator.”

Risks and hopes

Potanin says he is not particularly interested in cryptocurrencies like bitcoin and ether and didn’t invest in them. He calls bitcoin “a toy” and “a useful souvenir,” but says the issuance of electronic money should be left to central banks.

“I agree with the American regulator that it is a commodity and the quality of this commodity — you really do not know if it’s good or not, you buy it at your own risk,” he added.

But he is enthusiastic about the future of asset-backed tokens like the one Nornickel is preparing, as their usefulness goes beyond speculative value, motivating people to learn about the digitized commodities they will be trading:

“People like different kinds of bets, on football or boxing matches, for example. My idea is to encourage people to bet on something real and to learn something: what’s going on with oil, with metals, with ecological programs, what is the behavior of consumers.”

Given Potanin’s high profile (and government connections), some might wonder if Nornickel token projects are an elaborate way to skirt sanctions imposed on Russia by the U.S. and Europe (on the thinking that the tokenized metals markets are less heavily policed than other financial arenas).

But Potanin dismisses the idea. Neither he nor Nornickel has faced any direct sanctions from the West so far.

“For me personally, I don’t think it’s a good protection because sanctions go much further than your ability to have an account in a bank,” he said, adding:

“What makes me really anxious is that people may change and are already changing their attitude towards Russians. Doesn’t matter if it’s true or not, people start thinking, ‘maybe I shouldn’t deal with a Russian guy because who knows whether he’s under sanctions or what happens to him.”

He added that he doesn’t believe this attitude will stop his blockchain project, though:

“In this system that we have now in the world, digital initiatives, high tech and ecological initiatives are the last ones to be attacked and compromised. It’s not a remedy, but I think it’s good to go in that direction.”

Potanin image courtesy of Nornickel

Related:

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.

Related:

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

Related:

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.

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 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:

Mobile TeleSystems PJSC: MTS Placed Bonds Using Blockchain Technology

MOSCOW, RUSSIA / ACCESSWIRE / May 15, 2018 / MTS PJSC (NYSE: MBT, MOEX: MTSS), the leading Russian telecommunications operator and digital service provider, has placed commercial bonds in the amount of RUB 750 mln using blockchain smart contracts, making it the first transaction of its kind in Russia.

The RUB 750 mln Series KO-П01 bonds with a maturity of 182 days and an annual coupon rate of 6.8% have been privately placed on the OTC market. For the transaction, the National Settlement Depository (NSD) provided its proprietary blockchain platform based on Hyperledger Fabric 1.1. The primary bond buyer was Sberbank CIS.

The transaction was executed via DVP (Delivery versus payment) settlement assuming simultaneous movement of securities and money using blockchain, the immutable ledger for recording transactions. 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, Vice President, Finance, Investments and M&A, MTS, commented, “MTS continuously tests and implements new technologies across a variety of business areas, including corporate finance. As such, it is important for us to accelerate the launch of innovative solutions and reduce test time. Today, with the participation of our partners, we have successfully executed the first commercial bond issue in Russia using smart contracts based on blockchain throughout the entire settlement chain – from security placement and cash receipt to fulfillment of all obligations to the investor. MTS intends to continue employing blockchain-based solutions, primarily in financial markets, due to its clear advantages in increasing transaction transparency and the participants’ confidence, while substantially reducing transaction costs.”

Eddi Astanin, Chairman of the Board, National Settlement Depository, commented, “The NSD was one of the first institutions in Russia to begin working with blockchain, starting to develop the prototype platform for bond transactions in the first quarter of 2017. The pioneering transaction with Sberbank and MTS confirmed blockchain’s status as an efficient industrial technology providing confidentiality and speed during securities settlement. Our ultimate goal, in cooperation with market leaders, is to create an infrastructure for digital assets record, which is an important prerequisite to attract institutional investors, develop the market and accelerate growth in its capitalization.”

Igor Bulantsev, Senior Vice President, Sberbank CIB, commented, “Sberbank is the Russian leader in the field of technological and digital innovation in the financial sector. The issuance of MTS bonds allowed us to confirm the reliability, efficiency, and security of the platform based on blockchain for complex structured transactions with securities and once again proved the promise of technology for the development of the digital economy in Russia.”

For the transaction, the issuer, the central depository, and the investor had access to a decentralized platform. The project provided confidentiality in working with accounts and considered the requirements of Russian legislation.

A blockchain platform works only with digitized assets, making the process of bond placement, circulation and transaction recording fully transparent. Each participant has an opportunity to exchange documents online and monitor the status of the deal. Settlement is carried out directly in the accounting system, which allows participants to markedly accelerate the transaction. The chosen scheme of cryptographic protection allows all operations to be conducted in electronic format, in addition to the electronic signature service that is already available to the clients of the Moscow Exchange Group. The code for smart contracts is posted on GitHub: https://github.com/altoros/nsd-commercial-paper/ and is open in accordance with the requirements of the Hyperledger project, where Sberbank and the Moscow Exchange Group have been participating since 2016.

CONTACT:

Joshua B. Tulgan

Director, Department of Corporate Finance and Investor Relations

Mobile TeleSystems PJSC

Moscow, Russia

Tel: +7 495 223 2025

E-mail: ir@mts.ru

To learn more about MTS, visit the official blog of the Investor Relations Department at www.mtsgsm.com/blog/

SOURCE: Mobile TeleSystems PJSC

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