China Zheshang Bank, a national commercial bank, used blockchain technology to issue an asset-backed commercial paper, or ABCP. It was issued as part of the National Association of Financial Market Institutional Investors (NAFMII) pilot project for ABCPs.
An asset-backed commercial paper is a short-term investment issued by financial institutions to help companies meet their short-term objectives.
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Called „Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper“, the period of the Lianxin ABCP is six months and the deadline for the next issue has not yet been specified.
A NAFMII official indicated that the use of blockchain technology would provide companies with a „direct channel to markets, helping to greatly increase the accessibility of business finance“.
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Support for small and micro enterprises
Small, medium and micro enterprises often have difficulties with bond issuance, as they have no connection to open markets.
The launch of the Lianxin ABCP will ensure that SMEs can easily seek financial support. The ABCP „increases the accessibility of financing for SMEs that have difficulty financing themselves through direct debt issuance,“ said one official.
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It will also integrate supply chain finance with small, medium and micro enterprises to support them in their production.
China, banks and blockchain
China’s central bank, along with other major banks, is leading the way in innovating blockchain technology in traditional finance. On May 13, People’s Bank of China Vice Governor Fan Yifei urged China to accelerate its blockchain adoption strategy. Just one day after that, Cointelegraph reported that the PBoC proposed a blockchain-based commercial finance platform for the Guangdong-Hong Kong-Macao Bay area.
Earlier, in April, the Industrial and Commercial Bank of China published a white paper proposing the applications of blockchain technology in finance.