Posted on

BBVA Can't Hold Cryptocurrency – And That's a Problem

After becoming the first financial institution to combine public and private blockchains in a live transaction, Spanish multinational bank BBVA has hit something of a quandary.

Specifically, it’s unsure how to take its forward-thinking work … forward.

In the process of executing what was expected to be the third in a series of blockchain-based corporate loans, the bank had to work around a lack of legal and regulatory clarity over whether it could (or should) hold the cryptocurrency needed to power a transaction on ethereum.

In short, BBVA’s innovation is meant to act like a public notary service, combining private Hyperledger technology (used to negotiate the loan) with a public blockchain (in this case ethereum) in an effort to identify and store each loan agreement with auditability.

However, erring on the side of caution, BBVA chose to abide by European Banking Authority (EBA) recommendations and not use the native token of ethereum, ether, which also serves as a kind of fuel to update the ledger. Instead, the bank anchored the loans to an ethereum testnet, a blockchain which simulates the live version, but that doesn’t move real value.

No big deal, you might think, but this uncertainty is hindering the hard-won innovation work.

Alicia Pertusa, managing director of corporate and investment banking at BBVA, said that according to the EBA recommendations of 2014, European banks are discouraged from owning, buying or selling cryptocurrencies. She pointed out that the process BBVA used for the loans was exactly the same as it would have been on the live ethereum, the only difference is it would need the regulator’s approval before using the real ether.

While the Bank of Spain, the regulator in this case, would not go on the record, it’s clear regulators understand banks may need or want to have small amounts of crypto, not as an asset or an investment, but to validate transactions.

Regulators tend to point out that the EBA 2014 recommendation is not legally binding and thus is not a formal ban. Still, the compliance department of a given bank would have to judge whether this particular use of cryptocurrencies is advisable.

Pertusa told CoinDesk:

“We do think that regulators are evolving in the way they look at cryptocurrencies and in this case in particular we have talked with our regulators. They understand very well that the use of gas and ether in this kind of network is very different from the speculation of cryptocurrencies.”

Regulatory requirements

Still, the results are a rare, tangible example of how inconclusive guidance, combined with big-bank jitters about the possibility of plans going wrong, are having an impact on innovation.

Only in March of this year, EBA chief Andrea Enria said it would be more effective to prevent banks and other regulated financial institutions from holding cryptocurrencies, rather than regulating the tokens themselves.

In a statement to CoinDesk, the EBA said: “The EBA has issued several warnings to consumers regarding virtual assets and has discouraged financial institutions from gaining exposures to such assets in view of their high-risk nature. However, as a matter of EU banking law, there is no prohibition on financial institutions gaining direct or indirect exposures to such assets.”

None of this lessens the irony that BBVA is doing real corporate loans – €75 million to technology company Indra in April; followed by last month’s €325 million to oil and gas company Repsol; and last week €100 million to construction firm ACS – but is uncomfortable holding a few dollars worth of ether because of mixed signals from regulators.

In fact, BBVA’s corporate loans platform achieves a number of regulatory goals, such as making the pre-trade negotiation of the loan – which is normally done with a mix of phone calls and messages – a single, transparent and easily audited process. And the lessons learned from the tethered loans will be taken on into BBVA’s blockchain syndicated loans project, which will launch in the coming weeks.

As far as the public part is concerned, Pertusa acknowledged that while public blockchain notarization is a powerful tool for those who know how to use it (there is lots of appetite among the bank’s clients for this tech, she said) there still needs to be plenty of education elsewhere.

She told CoinDesk:

“We see this as the future of public notaries because at the end of the day it’s a public record of an agreement that’s been reached privately. But a lot still needs to happen in that direction in terms of regulation, admitting that this public blockchain has the same value as a public notary.”

A popular use case

Turns out public blockchains are a popular tool for anchoring data – that is, creating a timestamped proof that the data existed at a certain time –  in the world of enterprise ethereum.

Kaleido, the partnership between ethereum development studio Consensys and Amazon Web Services, found that enterprises wanted to anchor private blockchain applications on the public chain more than just about any other blockchain-as-a-service feature.

Indeed, a poll of Kaleido blockchain cloud users saw this use case come out on top with some 37 percent of votes.

The results mirror what we are hearing in our client and partner discussions around the world,” said Kaleido founder Sophia Lopez.

Asked what he thought of the uncertainty facing banks looking at public blockchains for this purpose, Steve Cerveny, CEO of Kaleido, said he was aware of the issue and is in discussion with customers about it, adding that a workaround is in the offing.  

“We are currently exploring how Kaleido’s pinning/tether feature as-a-service could alleviate this concern,” said Cerveny. “For example, they pay Kaleido in fiat for this optional feature and Kaleido handles all of the technical details including ether/gas.”

Speaking on behalf of the Enterprise Ethereum Alliance, Conor Svensson, blk.oi founder and EEA standards chair, said the conundrum demonstrates why financial organizations are far more comfortable working with private blockchain deployments.

He concluded:

“It’s where they can exert a much higher degree of control over the network and are not bound by the same regulatory concerns that apply whilst working with the public blockchains.”

BBVA image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Spain: BBVA Bank and Energy Co. Repsol Partner to Develop Blockchain Financial Solutions

Major Spanish banking group BBVA and Spanish energy company Repsol have signed an agreement to develop blockchain-based solutions for corporate banking, according to an announcement published June 20.

The product by BBVA and Repsol was developed using multiple different blockchain technologies, namely Hyperledger and the Ethereum test network. Nuria Ávalos, the head of Blockchain and Digital Experimentation at Repsol, commented on the collaboration:

“Repsol wants to actively take part in collaborative environments. Blockchain is a disruptive technology that is here to stay and the agreement with BBVA advances our strategy of driving digitization in all areas of our activity.”

The agreement reportedly is part of BBVA’s larger recent strategy of applying blockchain technology in corporate banking.

The latest solution is reportedly an evolution of the platform designed by BBVA for conducting the entire loan process using blockchain, from negotiation of terms to signing. In April, BBVA became the first global bank to issue a corporate loan, worth €75 mln ($86 mln), using distributed ledger technology (DLT), of which blockchain is one type. The move reportedly reduced processing time from days to a matter of hour.

Yesterday, BBVA’s CEO, Carlos Torres, said that blockchain is “not mature,” citing “volatility of underlying currencies” and possible compatibility issues with tax authorities and financial regulators among major issues to be addressed. However, he added that the advantages of blockchain are so important to the company’s business, that “when it is mature and regulators are ready,” BBVA wants to have the tools necessary to apply the technology to relevant use cases.

Posted on

CEO of BBVA Bank: Blockchain ‘Is Immature and Has Major Challenges’

Carlos Torres, CEO of Spanish bank BBVA, said blockchain technology is “not mature” and faces major challenges, el Economista reported June 18.

Torres expressed his concerns about blockchain’s current limitations at an event organized by the Spanish Association for Economic Journalism which focused on the prospects of the technology.

According to Torres, the main challenges for blockchain are the “volatility of underlying currencies” and possible compatibility issues with tax authorities and financial regulators.

Despite its contemporary challenges, Torres said that the advantages of blockchain technology are so important to their business, that “when it is mature and regulators are ready,” BBVA wants to have the tools necessary to apply the technology to relevant use cases, such as syndicated loans.

Torres added that, given blockchain’s potential, there should be adequate, unrestricted, but supervised spaces for developing the technology.

Banco Bilbao Vizcaya Argentaria (BBVA) is a northern Spanish bank founded in Bilbao in the late 19th century. According to an Economipedia report, BBVA was Spain’s second largest bank by assets and capitalization in 2017.

In April, BBVA became the first global bank to issue a loan using blockchain technology. BBVA conducted the entire process of a €75 million loan, from the negotiation of terms to signing, on a distributed ledger.  

Issuing the loan using blockchain technology reportedly cut the time needed to complete the process from “days to hours.” At the time, Torres said that the bank had “several more transactions in the immediate pipeline,” and that BBVA would be launching a pilot program with Spanish telecoms firm Indra. Indra has described itself as “at the vanguard” of blockchain applications.

Posted on

BBVA to Migrate to Ethereum-Based Educational Platform Soon

The BBVA (Bilbao Vizcaya Argentaria Bank) announced yesterday the launch of its BBVA Campus Wallet platform, a token-based training system which will run on the Ethereum blockchain soon.

BBVA is one of the leading banks in Spanish-speaking countries and the second most important bank of Spain.

Ricardo Forcano

The launch of BBVA Campus Wallet aims to improve the training process of the personnel assigned to this financial group. Ricardo Forcano, BBVA’s Global Head of Talent and Culture, was enthusiastic about the idea, mentioning that BBVA seeks to invest in HRs as a way of improving the quality of its services.

“We are living in a time of transformation when the capacity to learn will become the principal competitive advantage for any organization,”

The use of tokens allows more efficient management of the resources used in training while motivating staff to share their knowledge:

“(BBVA Campus Wallet) assigns value to training through tokens that certify each hour of training taken or given to other colleagues, and opens the doors to all employees – independent of their role – so that they can take courses that until now have only been available by invitation,”

Ethereum: A great ally for Tokenomics Enthusiasts

The Ethereum network is the most important blockchain after Bitcoin precisely because of its ability to manage tokens, mostly in the form of ERC20.

This characteristic has led BBVA staff to plan a migration of its BBVA Campus Wallet platform to the Ethereumblockchain in the near future. In a Press Release, BBVA emphatically stated this:

“The next step of this project is to take the leap into the Ethereum network. BBVA is preparing a trial for this platform so that all token exchanges will be publicly registered and the tokenomics defined in smart contracts. This entails a very important step in BBVA’s firsthand experience with the potential related to public blockchain networks.”

Currently, the platform has benefited over 4000 employees, of whom at least 57% have taken at least one class, causing the creation of 20833 tokens.

The most popular courses according to the institution are related to legal aspects, technology, financial products, and corporate values.

BBVA is not the only institution that targets the use of Ethereum and other blockchains to promote education. Other universities such as Woolf University, Tutelus and Oxford have already had successful experiences in this area.

A new demonstration that blockchain can revolutionize many initiatives beyond the purely economic ones.

Posted on

BBVA Issues $91 Million Loan Using Two Blockchains

Spanish banking giant BBVA has completed a pilot that issued a €75 million ($91 million) corporate loan using two different blockchain technologies.

According to a report from the Financial Times on Thursday, the bank’s latest exploration of the technology focuses on the entire issuance process, including negotiation of terms and signing the corporate loan. The system used for the trial is based on both a private blockchain and the public ethereum network.

The report said that, as as a first step, the pilot requires both the borrower and the bank to start terms negotiation on a privately held distributed ledger that simultaneously updates the transaction’s progress on both sides.

As such, BBVA claims the system can reduce the negotiation phase from “days to hours,” following which the completed contracts are moved onto the ethereum blockchain for immutable record keeping, the report said.

The latest experiment expands BBVA’s existing work in applying blockchain technology across a range of its business operations.

As previously reported by CoinDesk, the bank has already tested a blockchain solution for paperless trade transactions between Europe and Latin America. And in October of last year, it moved to use distributed ledger technology to match the foreign exchange between itself and its Mexican subsidiary.

BBVA is not, of course, the only established financial institution investigating the technology’s potential to streamline loans transactions.

Recently another two European banking giants – Credit Suisse and Dutch bank ING – also announced the completion of a live $30 million securities lending transaction based on a blockchain application co-developed with enterprise blockchain consortium R3.

BBVA image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

BBVA Launching Blockchain Shipping Solution

Banco Bilbao Vizcaya Argentaria (BBVA) has partnered with Blockchain company Waves to create a distributed ledger technology (DLT) platform for processing and handling shipping document submissions. The system, already being tested, was able to reduce the processing and handling times from 7-10 days, to just 2.5 hours.

The first test was performed on a shipment of tuna from Mexico to Barcelona, Spain. Generally, such a purchase is completed using a letter of credit, which can often still involve manual checking of documents which would require at least a couple of weeks for full verification.

However, with the immutable nature of Blockchain technology, the company was able to verify and fully process the letter of credit digitally, with the power of Blockchain. According to Daniel Berenguer, Head of Digital Trade Finance in Client Solutions:

“The operation was registered and securely validated at the same time for all parties, thanks to the distributed ledgers and the immutability of Blockchain.”

This system will undoubtedly be adapted into other logistics arenas where validation at a fast pace is critical for business logistics.

Posted on

BBVA Blockchain Pilot Cuts Time for International Trade Transactions

Spanish banking giant BBVA has successfully piloted a blockchain solution for paperless trade transactions between Europe and Latin America.

The blockchain pilot, built on the Waves platform, was carried out to automate electronic submission of documents for an actual sale transaction between Mexico and Spain in a move to speed up the time required for sending, checking and authorizing cross-border trades, a press release states.

The blockchain system reduced the time taken for document verification from 7–10 days to just 2.5 hours.

According to Patxi Fernández de Trocóniz, head of global trade at BBVA, the blockchain pilot marks a “leap forward” for effective international trade transactions.

He stated:

“The time it takes to manage the documentation was reduced to a process that lasted just a few hours, in which all parties – the banks, the importer and the exporter – were constantly aware of the status of the documents.”

The payment of the transaction was carried out using a “letter of credit” for the transport of 25 tons of frozen tuna, bought from Mexico by a company in Barcelona.

Utilizing blockchain for foreign trade allows the creation of a “safe and digital environment … as the foundation for a global foreign trade marketplace,” says BBVA Bancomer Corporate Banking and Governance head of strategy, Jorge Zebadúa.

The blockchain pilot forms part of BBVA’s effort to digitize aspects of finance with the use of nascent technologies like blockchain, the release added.

BBVA made its entrance into the Hyperledger blockchain consortium this March, joining 100-plus startups and businesses already involved in the enterprise-focused project.

Logistics container image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.