Blockchain Adoption Slashes Costs for ABS Issuance in China’s Financial Market

August 18, 2023

By Anjali Kochhar

In a groundbreaking study focused on China’s asset-backed security (ABS) market, the transformative impact of blockchain adoption has been highlighted. The research delves into the thriving ABS sector in China, which has rapidly embraced blockchain technology, leading to enhanced trading efficiency and lowered costs. The study also investigates the role of familiarity among market participants in amplifying the benefits of blockchain in ABS deals.

Traditionally, the potential of blockchain to reshape business processes has been discussed extensively, yet empirical evidence within the financial sector has remained scarce. However, this study, which analysed over 5,000 ABS products issued between 2015 and 2020, sheds light on the tangible benefits that blockchain integration can bring.

Key findings of the research indicate a significant enhancement in the efficiency and transparency of ABS trading. Notably, the cost of ABS issuance has seen a remarkable reduction of approximately 25 basis points. This cost reduction has been particularly pronounced in ABS deals related to less standardised and more intricate asset types like consumer loans and accounts receivable, as compared to residential mortgage-backed securities.

The study also unearths intriguing insights regarding the social dynamics at play in the adoption of blockchain technology within the ABS market. It reveals that the familiarity among crucial players in ABS deals can impact the perceived benefits of blockchain adoption. This influence varies depending on the type of underlying assets and the regulatory environment.

The impact of blockchain technology on the ABS market is poised to be a game-changer. By enhancing efficiency, transparency, and reducing issuance costs, blockchain has captured the attention of financial experts and industry players alike. This research adds a new layer to the ongoing discourse on blockchain’s role in financial services, offering concrete evidence of its potential to revolutionise established practices.

As the financial sector continues to evolve, the findings from this study could prompt further exploration into the utilisation of blockchain technology in other aspects of finance, potentially leading to even more transformative changes in the industry.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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