BBVA, the 35 billion euro bank from Spain, has officially issued a loan using the Ethereum blockchain. In a test of their pilot loan program, BBVA teamed up with MUFG and BNP Paribas to lend funds to Spain’s national electric company, Red Electrica.
Spanish bank BBVA has officially issued a loan via the Ethereum blockchain. As reported by Finance Magnates, BBVA, Spain’s second-largest bank, is working on a pilot program that will issue loans using Ethereum (ETH). In the recently issued loan, Spain’s national electricity company, Red Electrica, received funding from BBVA.
This transaction represents the first real-world use of BBVA’s pilot program, and was no small test.
It is reported that the loan was valued at $150M, although it’s unclear how much was transacted using ETH. BBVA also hasn’t disclosed what currency was used to transact. The report also does not include whether it was ETH or something with less volatility, such as a stablecoin.
BBVA’s loan was what is referred to as a syndicated loan. A syndicated loan is one that splits up one borrower between multiple lenders. This allows the borrower to borrow larger amounts, while also reducing risk by spreading the loan through different lenders.
In this case, the three lenders are BBVA, MUFG (Japan), and BNP Paribas (France), and all three banks have shown interest in using blockchain technology. Previously, MUFG (the fourth largest bank in the world) has researched using their own cryptocurrency, while BNP has been in talks looking to build their own blockchain.
The Future Of Finance?
This example shows the benefits to using cryptocurrency over traditional systems. According to BBVA, the current loan system (which is valued at 4.6 trillion euros), takes weeks to process transactions. Ethereum transactions, on the other hand, can be completed within hours.
Blockchain tech has also been touted as a great way to store signatures and contract terms, all time-stamped by which block they were included in. This means that ETH transactions can be referenced forever, whenever lenders or borrowers want to double-check the details of their loan. This could mean reduced costs and increased security for the issuance of loans:
Everything is automatically recorded by the system, in terms of back office and operational costs, said Ricardo Laiseca, Head of Global Finance, BBVA.