The Bank of Montreal (BMO) is hoping to demonstrate viable, real-world applications for blockchain, launching a first-of-its-kind pilot in Canada using the technology for a fixed income transaction.
The transaction, by the bank’s BMO Capital Markets division, has BMO as the issuer and the Ontario Teacher’s Pension Plan as the buyer of a $250 million, one-year floating rate deposit note, according to an Aug. 15 release that called the transaction the “first-ever Canadian fixed dollar income issuance” using blockchain.
“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities,” Kelsey Gunderson, head of global trading for BMO Capital Markets, said in the release. “We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients,” she said.
BMO used open-source blockchain infrastructure to design and build the transaction’s platform, which allows the issuer and buyer to “view the transaction on the blockchain and verify the accuracy of the term sheet information and payment amounts until maturity of the fixed income security,” according to the release.
The intention behind using blockchain technology, BMO said, is to lower costs in areas including compliance, financial reporting, security clearing and settlement of cash transactions.
BMO hopes that the successful launch of this pilot will lead to future projects and stated in the release that it’s looking to partner with other clients and institutions in the “evolution of blockchain as an open settlement system.”