Rabobank used blockchain to issue €40 million in euro commercial paper maturing in one week in 19 pilot transactions.

With rising interest rates, blockchain is coming to the fore to power shorter settlement times, enabling intraday transactions and thus improving liquidity.

The commercial paper, denominated in euros and pounds, was issued by the Dutch State Treasury, Rabobank Treasury and Austria’s Erste Bank, with Northern Trust Asset Management as investor.

Instead of taking two days, issuance, distribution and settlement took less than 30 minutes and cost less than the conventional process. Liquidity was enabled in both the primary and secondary markets.

“Blockchain’s reputation as a technology with legitimate applications for global financial markets has undoubtedly been shaken by the turmoil surrounding cryptocurrencies,” said Roland van der Vorst, global head of wholesale and rural innovation at Rabobank.

“The scale and success of our pilot, delivered in partnership with some of the largest financial institutions in Europe, will help address misconceptions and show the revolutionary impact that innovation in this space can really have.”

Rabobank developed R3’s Corda enterprise blockchain-based platform, which was also used in pilots last year.

However, there is a hint that commercial paper may not be purely native blockchain instruments. The announcement reads: “Securities were instantly issued and settled against fiat cash on Euroclear Bank’s infrastructure.” We requested clarification, but did not receive a response in time for publication.

The solution is integrated with legacy systems, including for risks, and the Netherlands Financial Markets Authority has access to the blockchain for oversight.

“We believe that the digitization of money markets can improve liquidity and transparency at a critical time for the asset management industry. Our 2021 pilot program was focused on proof of concept,” said Youssef el Mir, global head of commerce at Rabobank.

“These latest transactions and the solution we have collaborated on to deliver demonstrate that blockchain technology can be seamlessly and seamlessly integrated into the legacy systems of financial institutions with the right approach.”

Commercial paper is a tool for short-term bank liquidity with others, including repos and trading in liquid securities. JP Morgan and Broadridge are using blockchain for separate intraday repo solutions. HQLAX uses a distributed ledger to allow assets to be traded intraday that would normally take two days to settle. And Finteum is a startup that plans to launch intraday currency swaps and repos.