On September 21st, Caixin published an article announcing that the “Baidu-Chang’anxinsheng-Tianfeng 2017 First Phase of Asset Backed Securities” are now traded on the Shanghai Stock Exchange, making it the first blockchain-based ABS publicly traded on Chinese exchanges.
According CN stock, the value of the ABS issuance is 400 million CNY, with preferred A class of 340 million CNY and preferred B class of 24 million CNY. The underlying assets are personal auto consumer credits.
Early in May, Baidu, Baiqian Leasing and Huaneng Trust issued private equity blockchain ABS. In the Baidu-Chang’anxinsheng-Tianfeng project, one of Baidu Finance’s subsidiary arranged the deal and provided technology BaaS (Blockchain as a Service). Institutions in the project acts as nodes in the private blockchain.
Currently, most ABS issuances are recorded through excel or documents, which has two main disadvantages: first, the traditional business model is time-consuming and cost-inefficient, since the securitization process is relatively long involving multiple parties; second, it is difficult to for timely and efficient information flow due to the complex nature of securitization process.
Blockchain technology had made it possible to monitor real-time data and cash flows on different stages of the underlying assets: pre-ABS loan origination, payment collection in duration period, payment overdue, and ABS trading. This enhances transparency of the underlying assets for investors. On the other hand, it is also easier for regulators to perform supervisory responsibilities.
The issuance of publicly traded blockchain ABS is a great example demonstrating that blockchain technology has much wider implications in the finance industry. While banning cryptocurrency trading, the Chinese regulators seem to welcome domestic companies developing supervised applications of blockchain technology.