BNP Paribas Securities Services, a subsidiary of BNP Paribas banking group, has collaborated with renewable energy crowdfunding providers Lendosphere, Enerfip and Lumo to enable private companies to issue mini-bonds through distributed ledger technology, Financial News reported.
This follows the subsidiary’s partnership with crowdfunding platform Smart Angels to run a pilot project that will allow private companies to issue securities on the primary market and give investors access to the secondary market using blockchain technology. According to Financial News, as part of the new initiative, the bank is working on a distributed ledger that will maintain a record of all mini-bonds issued through the platform, along with all of the changes in their ownership.
“Blockchain technology is particularly suited to the fundraising needs of private companies as transactions volumes are typically lower than for listed companies. This technology could also serve to standardise processes around the trade lifecycle of mini-bonds”, Marc Younes, head of business management at BNP Paribas Securities Services’ Innovation & Digital Lab, said.
Mini-bonds are a means for individuals to lend money directly to businesses. They have terms of 3 to 5 years, and investors earn regular interest payments during the life of the mini-bond. In contrast to traditional bonds, these must be held until they mature, meaning that they cannot be cashed in early.
With distributed ledger technology, the transactions will be performed more securely, quickly and efficiently, the bank said. It expects to see the new platform ready by the end of this year and its subsequent launch once French law on mini-bonds receives final approval.
The French government passed a new ruling, earlier this year, authorizing the use of distributed ledger technology for the issuance of mini-bonds and recording of trades, BTC Manager reported. The government has been making efforts to boost the domestic crowdfunding sector by proposing regulatory measures for promoting the use of alternative funding methods for debt-based instruments such as mini-bonds.
The statute stated that the issuance of mini-bonds can be recorded on a blockchain "under conditions fixed by a decree in Council of State”. "In this case, the bonds can be sold under appropriate modalities: the recording of the sale operation in an electronic shared recording system proceeds to the transfer of the ownership title”.
Earlier this month, BNP Paribas unveiled its new FinTech laboratory set up at its New York headquarters during a recently held blockchain hackathon. The lab will focus on building blockchain solutions to employee problems, along with artificial intelligence (AI) and big data.
