Nivaura Creates First Blockchain Floating Rate Bond, Enters Testing Stage By Santander, LeasePlan
First Blockchain-Based Floating Rate Bond Created By Nivaura, Entering Testing Stage
- Nivaura created a floating rate bond that uses blockchain tech.
- The financial instrument is being tested by Santander, LeasePlan, LSEG, and Premfina.
Nivaura, a capital markets startup, has been shaking things up in the traditional financial industry, using blockchain technology to create a new product that they are calling “the first commercially viable floating rate bond.” Now that the product is available, it has already started testing with Santander, a banking giant, and LeasePlan, a company that leases out vehicles.
The announcement was planned to come out at the same time as the Consensus 2019 event by CoinDesk in New York. Nivaura noted that other clients have been working on the floating rate notes (FRNs), like Premfina, a premium financing service provider, and London Stock Exchange Group (LSEG). CEO of Nivaura, Avtar Sehra, spoke with CoinDesk about the matter, confirming the involvement of the aforementioned entities.
This platform has been involved in all of the five “sandbox” associates of the UK Financial Conduct Authority. This program helps the industry with digital asset issuance while following the compliance protocols set forth with public blockchains. Three years ago, the platform had launched a reinsurance instrumented, which put many of the noteholders on a network for on-chain allocation. At the same time, Nivaura also developed a smart contract for “calculation and paying agents” with Ethereum.
Now, the company is using the same type of approach with their FRNs, which uses money market data. The calculation comes from the current market rates. Along with a quoted spread. According to Sehra, the project is a useful way to use the efforts that his team has made for the tokenization of equity.
“We are extending the simple tokenized equity and bond models to include more interesting hybrid and structured instruments that would be more useful for our clients and partners. A natural extension of this is to ensure that the interest is not just simple fixed-rate coupons but has the flexibility to be a floating value depending on some external reference rate.”
Breaking down tokenized securities into two parts, Sehra said that these products come down to a token register and an events manager. The token register, which is a smart contract, creates a financial instrument on the blockchain and makes it possible to transfer the tokens. The events manager handles the instruments in the different activities that they are involved with.
Right now, the concept of managing and programming these events into a smart contract is not viable at a commercial level. The regulations are not made a way that the rules are easily understood, according to Sehra, but it could be possible to automate and standardized these flows of information.
“Just like the token register model requires whitelisting and accountable end-points to ensure decentralized registers can be used for securities, event management on a blockchain will also require endpoint checks and sign off by trusted parties before capital markets participants will even contemplate using it.”