A Chinese commercial bank issued China’s first asset-backed commercial paper worth $16.93 billion on a blockchain.
China Zheshang Bank, a national commercial bank, used blockchain technology to issue an asset-backed commercial paper, or ABCP. It was issued as a part of the National Association of Financial Market Institutional Investors’s (NAFMII) pilot project for ABCPs.
An asset-backed commercial paper is a short-term investment issued by financial institutions to help companies meet short-term goals.
Dubbed “Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper,” the period of the Lianxin ABCP is six months and the span of the next issuance is yet to be specified.
An official of the NAFMII noted that the use of blockchain technology would provide enterprises a “direct channel to markets, helping to greatly increase the accessibility of business financing.”
Helping small and micro enterprises
Small, medium, and micro-enterprises usually face difficulties with bond issuance as they do not have any connection with open markets.
The launch of Lianxin ABCP will ensure that SMEs can seek easy financial support. The ABCP “increases the accessibility of financing for SMEs that have difficulty with financing via direct debt issuance,” an official stated.
It will also integrate supply chain finance with small, medium, and micro-enterprises to support them with their production.
China, banks, and blockchain
The central bank of China along with other major banks is spearheading blockchain innovation in traditional finance. On May 13, the People’s Bank of China’s deputy governor Fan Yifei urged that China needed to accelerate its blockchain adoption strategy. Only a day after that, it was reported that the PBoC proposed a blockchain-based trade finance platform for the Guangdong-Hong Kong-Macao Greater Bay Area.
Earlier, in April, the Industrial and Commercial Bank of China released a white paper proposing the applications of blockchain technology in finance.