Banco Bilbao Vizcaya Argentaria (BBVA), Spain’s second-largest bank, has completed the first “structured green bond using blockchain technology to negotiate the terms and conditions.” The deal was conducted with Spanish insurance house MAPFRE. As per the press release, February 19, 2019, MAPFRE will invest USD 40 million to fund sustainable products.
Simplicity with DLT
The deal with Spain’s largest bank is unique in different ways. First, it will be used to fund green projects within the bank’s framework of sustainable development goals. Secondly, it becomes the first successful project to be negotiated on a blockchain platform.
According to the bank’s official statement, the funds will specifically finance green projects under BBVA’s Sustainable Development Goals (SDGs). The bank’s Head of Global sales Juan Garat reiterated the company’s focus on innovative, sustainable solutions. Garat explained:
“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.”
Structured bonds are negotiated debt securities featuring individualized terms. Their main characteristic is that they have general terms of the issue that outline maturity, repayment terms, and interest rates. Structured bonds have become attractive alternatives to traditional debt securities because of the flexibility involved in defining their terms. Explaining the bond’s details, José Luis Jiménez, Chief Investment Officer at MAPFRE said:
“The bond contributes to the diversification of MAPFRE’s investment portfolio, and it does so with an innovative and sustainable product – two qualities that fully align with the company’s investment policy.”
Launching Pad for Blockchain-Based Applications
Last December 2018 BBVA announced the conclusion of a €150 million ($169 million) via blockchain technology. That was then referred to as BBVA’s first blockchain-based loan transaction that involved a non-Spanish borrower.
During the last engagement, the two leading Spanish banks namely BBVA and Banco Santander inked a deal with the European Union-International Association for Trusted Blockchain Application. The organization aims to create EU blockchain guidelines and create a launching pad for blockchain-based applications within the EU territory.
Banco Santander is the other Spanish bank that is keen on the blockchain technology. The financial institution has partnered with Ripple and is already testing the services offered by the blockchain-based company to improve its products and service delivery. Even though Spain is trying to introduce regulations to the blockchain and cryptocurrency market, the country is still facing some challenges that are yet to be addressed.