Spanish exchange ready to test blockchain-based SME financing system

The Spanish exchange Bolsas y Mercados Españoles (BME) will test its blockchain infrastructure for the financing of small and medium-sized businesses after a successful pilot run in 2020.

According to Finextra on Friday, these next trials by BME will involve companies that are part of the country’s SME finance ecosystem, under the auspices of a regulatory sandbox created by the Spanish Ministry of Economy and Digital Transformation.

As previously reported by Cointelegraph, this sandbox is seen as an important step in promoting greater fintech development in Spain, with an emphasis on improving competition while lowering the barriers to entry for participants.

Investment service companies and corporate loan providers took part in the aforementioned pilot phase in 2020.

As part of the second round of testing, the BME will likely attempt to assess the suitability of the Ethereum-based system for raising capital for limited liability companies outside of the usual traditional bank funding channels.

Indeed, the BME’s blockchain platform aims to make it easier for SMEs to fund digital assets, which are funding options such as convertible bonds and participation loans.

The project marks a further expansion of the BME’s digitization policy in recent times. In March 2019, the Spanish stock exchange completed the pilot tests of its blockchain-based system for electronic certificates via collateral pledges.

For the SME finance project, the blockchain platform will also include a digital wallet where SMEs can store their assets – both financial investment instruments and electronic money.

Choke points in trade finance are another touted use case for blockchain. Decentralized ledger technology solutions are booted to remove significant choke points that are affecting SME funding.

In addition to SMEs, major banks are also using blockchain technology to limit the risk of trade finance risks.