MegaFon and Raiffeisen Bank complete first blockchain-based ruble bond placement

During the last couple of months, numerous studies have allowed the emergence of blockchain technology for numerous purposes. Recent reports indicate that not long ago, a public joint stock company known as MegaFon, who’s a provider of integrated digital services, has become the first bond issuer in Russia, to complete a blockchain-based ruble bond issue.

This transaction is fairly unique for the Russian market, considering the fact that it used blockchain technology for the settlement of the transaction. To put things better into perspective, via the technology, the issuer, investor and central depositary all get access to a decentralized platform where settlements can be made.

The 500 million ruble issue by MegaFon, was completer correctly, whereas the full issue has been purchased by Raiffeisen Bank.

It is important to point out the fact that work on the prototype for bond transaction settlements was started back in the first quarter of 2017, and finalized by the end of the year. Those working on the project made sure to successfully keep securities records secure and private, while also respecting all regulations provided by the Russian financial regulator for these type of transactions.

At this time, the system works via digitized assets only, thus making the process associated with bond placements, its relevant circulation and transaction accounting both simple, but also transparent. Those involved in a transaction can easily exchange documents instantly, while also tracking the transaction status. Additionally, the system also employs cryptographic protection, thus making sure that all operations can be safely carried out electronically, hence decreasing costs, reducing possible errors and speeding up the process considerably.

Following the transaction, the CFO of MegaFon, Gevork Vermishyan stated that:  "Following our issue of exchange bonds at a record low rate last week, we have become the first in Russia and one of the first in the world to place blockchain-settled commercial bonds. The deal exemplifies MegaFon's efforts to demonstrate its leading role in the development of Russia's digital economy. We see significant potential in blockchain, which is slowly but surely becoming the new standard for exchanging transaction data, replacing traditional systems of settlement. We are pleased to work with NSD and Raiffeisenbank to take the first steps on the path to the Russian securities' market's digital transformation. I want to thank the joint project team for making this successful breakthrough."

Based on everything that has been outlined so far, it is expected that similar technology will be used for transacting more bonds in the future, especially in Russia.