- This is the first blockchain-based residential mortgage-backed securities platform (RMBSs).
- All involved parties will be able to track assets, manage cash flow and other businesses on the DLT platform.
- Other Chinese firms have already started their operations on the blockchain to enhance efficiency.
The giant Chinese Bank of Communications has issued residential mortgage-backed securities (RMBSs) worth 9.3 billion yuan ($1.3 billion) using its proprietary blockchain network Jucai Chain. The bank is the main issuer of the securities that have been underwritten by China International Capital Corporation, in which the Industrial and Commercial Bank of China and China Merchants Bank also participated.
Chinese Continue to Ride on Blockchain
The bank of Communications stated in a September 18, 2018 press release it had officially launched its own blockchain-based asset secularization platform earlier in June and completed a first phase involving transferring securities mortgage date to the blockchain. The press release stated:
“All parties in the [Jucai] chain [were able to] view and obtain relevant information in real-time to ensure the authenticity of the underlying assets and the effectiveness of disclosure.”
A representative of the Bank of Communications explained that the information on the mortgages placed on the blockchain will enable all the RMBS participants to assess the investment risks using due diligence besides being able to process transactions in a peer-to-peer manner. The China Security Times also stated that the digital mortgage base will be available for intermediaries like the global consulting group PricewaterhouseCoopers and the multinational law firm Zhonglun among others.
Chinese authorities have dealt harshly with cryptocurrencies and prohibit any form of trade or investments using digital assets but it seems to maintain a blockchain-friendly stance. In July, China’s fourth-largest bank, The Agricultural Bank of China, issued its first blockchain-based loan worth $300,000. In August, one of the leading Chinese financial institutions Zheshang Bank issued securities worth $66 million using their proprietary blockchain platform while earlier this month the country came close to accepting blockchain technology as evidence that can be used in legal disputes.
Blockchain’s Use in the Banking and Financing World
The Decentralized Ledger Technology is gaining popularity and being tested in the real estate industry. For instance, the Russian branch of Raiffeisen Bank issued its pioneer electronic mortgage while in the Netherlands the state land registry is planning to transfer all its records to a blockchain ledger within the next three years.
The Bank of Communications states in its release that the “Growing Finance Chain” has created an environment where transparency and standardization of Asset-Backed Securities (ABS) product operations have improved tremendously. The report further says blockchain has helped reduce product financing costs, strengthened full-cycle risk management and improved operational efficiency. The report read in part:
“The successful completion of the first phase of the “Juicai Chain” platform is a major innovative exploration of Bank of Communications’ use of financial technology to optimize investment banking business.”
