European Commercial Paper (ECP) on Blockchain Thanks to Banco Santander and EY

The Belgian company Euroclear has announced the development of a blockchain project for the issuance of European Commercial Paper (ECP). The proposed solution is a collaboration between the European Investment Bank (EIB), Euroclear, Banco Santander, and EY. 

Bringing more Transparency to the ECP Market

Euroclear announced on June 19, 2019, that it had completed the development of a “proof-of-concept” for the development of a blockchain for the issuance and settlement of European Commercial Paper (ECP). The work was completed thanks to the collaboration of the international giants European Investment Bank (EIB), Banco Santander, and EY.

An ECP is an unsecured, short-term loan issued by a bank or corporation in the international money market, denominated in a currency that differs from the domestic currency of the market where the paper is issued.

These loans are used as debt instruments issued by a borrower that needs funds in the short-term. The most common maturity for ECP is 182 days) Nevertheless, the instrument’s lack of traceability, transparency, and slow issuance pins them as ripe for innovation. ECPs, for instance, are settled in two working days, and overnight settlement is not an option.

Euroclear, which represents one of the main clearinghouses for the settlement of Euro commercial papers, attempts to solve these problems with a blockchain solution that will reduce time-consuming bilateral processing between multiple market participants. It will also provide one efficient consolidated hub for issuing ECPs with Delivery Versus Payment (DVP) settlement by Euroclear.

Their goal is to create a new market standard that allows ECP issuance on the same day.

Thanks to the success of this initiative, Euroclear and its partners are ready to launch their solution on a larger scale as confirmed by Angel Pavlov, Senior Manager at EY and designer of this solution. Pavlov said:

“Following EY winning the EIB Blockchain Challenge, we are pleased to validate our solution on a larger scale. Further development of this innovative blockchain case is in line with our commitment to consistently bring more value to the business through innovation.”

Euroclear appears to have found its place in the blockchain industry, but this has not been its first attempt. As informed on BTCManager, the Belgian firm previously attempted to penetrate the precious metals market via an unsuccessful joint venture with Paxos.