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German automotive manufacturing company Continental, together with banking giant Commerzbank and technology firm Siemens, has successfully completed a pilot project to process a money market security between the companies using blockchain technology.
According to the official release, the transaction was carried out last month and had a volume of €100,000 and a term of three days. The money market security was in the form of a euro-denominated electronic commercial paper and was issued by Continental.
Commerzbank moved away from its conventional role of acting as a broker between contracting parties to that of a platform operator and service partner. The transaction used Corda blockchain platform, provided by Commerzbank, while Siemens subscribed to the money market security as an investor. Legal advice was provided by corporate law firm GSK Stockmann.
For the pilot project, a regular securities transaction between two companies was used as a starting point. The companies generated the money market security as well as processed the trade (including payment processing) in a legally binding manner using blockchain.
“The documents and funds were exchanged in a matter of minutes rather than days using this process,” the release said. “This is being regarded as the first step toward technical scaling of automated securities issues.”
Continental sees a number of advantages in using blockchain technology in the Finance department. This includes direct contact (including with investors in short-term bonds), considerable flexibility and efficiency combined with increased security, as well as enhanced transparency.
“It was important for us to test this technology at an early stage and develop action points for the future. There are clear advantages of using this technology, including significantly shorter processing times and faster time to market,” Peter Rathgeb, corporate treasurer at Siemens, said.
“Some of the major challenges revolve around the security and performance aspects and the legal area, such as the importance of creating a consistent European understanding of the standards and legal points involved when it comes to blockchain-based transactions.”
