FOCUS: Blockchain-based bond market, pioneered by MegaFon, may reach 15 bln rbl in 2018
By Yekaterina Yezhova
MOSCOW, Jan 15 (PRIME) -- A successful debut bond sale via blockchain by one of Russia’s biggest mobile operators, MegaFon, may have unlocked a market segment, which may reach up to 15 billion rubles in 2018, but analysts wonder whether more investors will brave the world of the new technology.
“For the first time in Russia, MegaFon issued 500 million rubles of bonds using the blockchain technology in September 2017, and the placement’s organizer, Raiffeisenbank, purchased the bonds. The operator redeemed the nominal value of the securities on December 22, 2017,” Yulia Dorokhina, head of MegaFon’s press service, told PRIME.
The platform was provided by the National Settlement Depository, a part of the Moscow Exchange group. “This was the first successful example of a full bond lifecycle using blockchain – from placement through to repayment,” Dorokhina said.
“The deal was an important step in testing the possibilities of the new technology for the securities market and confirmed in practice the hypothesis about its effectiveness.”
Access to a decentralized platform was granted to MegaFon, the bank, and the depository. Work on a prototype of the platform started in January–March 2017. The system functions only with digitized assets and makes the process of placement, circulation, and recording of bonds very transparent. Each participant of the deal could exchange documents online and track the status of the transaction.
Blockchain acts as a single source of information on current rights, obligations, and operations of the participants, who can keep local records by copying data from blockchain.
Alpari senior analyst Roman Tkachuk paid attention to the fact that the deal’s organizer, Raiffeisenbank, purchased the issue and actually credited the private company. “It’s the simplest scenario of bond placement, comprising one transaction, but usually such deals attract a wide circle of investors,” he said.
Blockchain-based bonds have no remarkable advantages as compared to ordinary issues. Coupon rates depend on a borrower’s financial solvency, rather than its devotion to new technologies. “I wonder whether blockchain-based bonds will be offered to a wider investor community. One thing is to make a large scale placement, while it’s a completely different thing to sell securities to friendly donors,” Tkachuk said.
After the redemption, MegaFon said that the deal triggered enthusiasm about the new technology among issuers and investors, and the National Settlement Depository awaits interest to blockchain-based bond issues to reach 10–15 billion rubles in 2018.
“We expect several issues of bonds via the blockchain technology in 2018. The securities may be placed by Russian banks, like Alfa-Bank and Sberbank, or Internet companies that develop the technology. Coupon rates will not be significantly different from those of ordinary securities, and maturity depends on a borrower and is often up to 10 years,” the Alpari analyst told PRIME.
“I’d like to highlight that it is a global trend. Stuttgart-headquartered automotive giant Daimler AG issued 100 million euros worth of bonds via blockchain in late June 2017.”
It is in the spirit of MegaFon to use innovative technologies. “The operator has been the first to introduce high-speed access to the Internet in Russia, video communication, and mobile television of high-quality to the mass audience. And in the blockchain development, the company is one of the pioneers. Besides, it’s MegaFon’s choice to take part in new economic trends and share expertise in advanced technologies,” the analyst said.
MegaFon’s spokeswoman Dorokhina also said that the operator had carried out Russia’s debut payment operation via blockchain with Alfa-Bank and Sberbank.
“Now, priority is with applying the blockchain technology to deals with more participants, as well as on horizontal scaling and increasing the share of blockchain-based document turnover,” she said.
“The deals have ignited a high level of interest on the Russian market and we’re certain that our example will prompt other players to use the technology, which will bring innovation to traditional markets on the whole. However, Russia still lacks a regulatory and legal base for further expansion of blockchain, which is something that needs to be developed.”
(56.6019 rubles – U.S. $1)