Whilst Spanish regulators have made their viewpoints on more stringent cryptocurrency and blockchain assets regulation somewhat clear-cut, this hasn’t stopped a major Spanish bank from announcing that they will be using the technology to facilitate a green bond issuance. The financial institution in question – Banco Bilbao Vizcaya Argentaria (BBVA), are Spain’s second largest bank.
As per the BBVA official website, the news confirms that structured green bonds will be supported by the blockchain protocol. The announcement indicates that the structure will be in collaboration with Mapfre, a Spanish insurance company.
The aforementioned firm will be investing 35 million EUR in to the project, which has the overarching aim of facilitating financial products whilst remaining sustainable. The press release itself states that BBVA “issued the first structured green bond using blockchain technology to negotiate the terms and conditions,”
Green Bond Issuance Supported by Blockchain Technology
For those unaware, a green bond operates in a similar way to traditional investment bonds, although there are some clear differences. First and foremost, as the name suggests, a green bond is linked specifically to investment projects that center on sustainable projects.
This can include a range of green initiates such as pollution prevention, sustainable forestry and fishery, water management, clean transportation and eco-technologies. Not only this, but due to the nature of the underlying projects linked to green bonds, governments often give financial institutions certain tax benefits, and in some cases, outright tax exemption.
In fact, according to rating agency Moody’s, global investment in green bonds surpassed $93 billion in 2016, further illustrating investor appetite for financial products that aim to make a difference.
When it comes to the deal struck by BBVA and Mapfre, the 35 million EUR that was invested will be based on a 6 year term, with the underlying currency rate based on a 5 year Euro swap rate.
According to the Chief Investment Officer at Mapfre – José Luis Jiménez:
“With this deal, BBVA reasserts its firm commitment to both sustainable financing and new technologies. Using DLT – distributed ledger technology – for this transaction allowed us to simplify the processes and streamline the negotiation time frames, which is in line with our pursuit of excellence in customer service.”
The CIO continued by adding that the project is potentially the first of many, with other sustainable investment-based products possibly on the way.
BBVA Bank Continues to Grow its Exposure to Blockchain Technology
On the other hand, this isn’t the first time that BBVA have involved themselves in blockchain technology.
For example, in November 2018, it was reported that BBVA bank would be utilizing their blockchain network to facilitate a 150 million EUR loan. The deal, which was also in collaboration with major financial institutions BNP Paribas of France and MUFG of Japan, would be loaned to Red Electrica Corporation.
The loan arrangement was fully supported by blockchain technology throughout the end-to-end process, with data represented on a secure ledger built on top of the Ethereum protocol. Prior to this, April 2018 saw BBVA bank close a 75 million EUR loan arrangement using distributed ledger technology.
Ultimately, the usage of blockchain technology to facilitate inter-bank financial transactions has long been discussed as a potential solution to the current status quo. At present, the process of issuing corporate loans is a long, complex and highly inefficient process which requires a significant number of manual interactions.
Not only this, but traditional methods of performing high-value corporate loans are hugely costly. On the contrary, blockchain technology allows financial institutions to initiate fast, low-cost and efficient transactions, with the framework often noted for its immutable characteristics.
