BBVA Completes €150M Syndicated Loan via Ethereum

Top Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA) has announced on November 7 the completion of what it has dubbed as the first “blockchain-based syndicated loan arrangement.”

While the announcement indicates that “This is the first time a real life deal has actually been done,” the deal appears to have been completed on the Ethereum testnet and not on the mainnet.

The syndicated loan is actually a continuation of an earlier Blockchain exploration by BBVA. The bank has revealed in April that it had executed a global corporate loan transaction on the Ethereum testnet. This pilot program aims to determine how Blockchain tech can boost transparency, speed, and efficiency of transactions.

The recently completed syndicated loan is different in such a way that rather than engaging just one lender, it enables other financial institutions to combine money together and lend it to one single borrower.

Japan’s Mitsubishi UFJ Financial Group (MUFG) and France’s BNP Paribas join BBVA in this syndicated loan endeavor, which has already seen the financial institutions collectively lending Spain’s national electrical grid operator Red Eléctrica Corporation with €150 million. In addition, Linklaters S.L.P. and Herbert Smith Freehills LLP, the legal advisors, also have access to the Blockchain platform.

While BBVA fails to specify how the syndicated loan has been accomplished, the announcement has detailed the process taken. The announcement indicates that Blockchain enables every step of a transaction to be stored together with user codes and timestamps upon completion. Participants can access the Blockchain and “once the contract is signed, a unique document identifier is recorded in Ethereum’s public blockchain network (specifically, in its test network, ‘testnet’) to guarantee its immutability against third parties while safeguarding its confidentiality at all times.”

Aside from its involvement in the completion of various types of loans through Blockchain, BBVA is also one of the founding members of the Enterprise Ethereum Alliance. BBVA, one of Spain’s largest banks, also joined a non-profit initiative known as Red Lyra in May of last year. The bank wanted to develop open-source Blockchain platforms that have the potential to enhance certain business practices for financial institutions, utility services, and telecommunication service providers.