Sberbank Patents Blockchain Repo Solution in a Purported First for Russia Banks

Russia's largest bank, the state-owned Sberbank, has pioneered a blockchain solution for repurchase agreements - also known as repo.

According to a Sberbank announcement on Nov. 19, the bank has been awarded a patent for the solution, which uses smart contract technology to automate repo transactions between parties.

Repo marketsRepurchase agreements are widely used in wholesale funding markets and serve as a vehicle for banks and non-banks to access liquidity via short-term funding agreements that are collateralized by underlying securities.

In a repo transaction, a bank buys a security and pays for the purchase by immediately reselling it for a period - from just one night to as long as three months - with a commitment to repurchase it at an agreed price.

Reducing counterparty risk According to Sberbank's announcement, the bank is ostensibly the first in Russia to have patented a repo deals solution with a blockchain-based execution system.

Sberbank's solution includes a mechanism to monitor the market price of the collateralized security in question throughout the course of the repo's term.

Sberbank notes that its solution covers the repo lifecycle end-to-end, which it claims eliminates counterparty risk and, in doing so, could translate into more affordable financing.

In May 2019, Cointelegraph reported that the bank had halted its potential cryptocurrency trading plans because the Central Bank of Russia is still largely opposed to the adoption of the crypto space.

At the time, Sberbank vice president Andrey Shemetov said that the bank is waiting for decisive cryptocurrency legislation to be adopted before moving ahead with more serious plans.

In June, Sberbank CEO Herman Gref confirmed the bank's choice not to develop cryptocurrency-related offerings, noting the institution was focused on developing blockchain solutions for financial services.