As a financial innovation product, asset securitization has shown a rapid growth trend in recent years. However, the traditional asset securitization trading model has problems such as opaque underlying assets, asymmetric information, and complex transaction processes, resulting in difficulties in ensuring the authenticity of underlying assets, inefficient processing of due diligence information, and increased difficulty in supervision.
As a new Internet technology, blockchain has the characteristics of decentralization, openness and transparency, immutability and high security, and the application of blockchain technology to the asset securitization business transaction model can effectively eliminate the structural risks of asset securitization.
Blockchain Technology Overview
Blockchain is an innovative application mode of distributed data storage, peer-to-peer transmission, consensus mechanism, encryption algorithm and other technologies in the Internet era.
Blockchain is essentially a distributed ledger, which is based on cryptography, continuously stores data in a block chain structure, and is participated in by multiple parties and maintained by multiple parties to achieve the effect of decentralization; the information on the blockchain is open to participants, and the information is relatively open and transparent; through technical means, the information on the blockchain is permanently preserved and cannot be tampered with once it is successfully uploaded. Therefore, blockchain has the advantages of high security, openness and transparency, instant efficiency and so on.
The pain points of the traditional asset securitization trading model
As a structured financing product, asset securitization has a relatively complex transaction structure, many participants, and a long data transmission chain, and has always had problems such as opaque basic assets, asymmetric information, inefficient data circulation between participants, and difficult supervision during the duration of existence.
The traditional asset securitization trading model has the following pain points:
First, information asymmetry and the authenticity of the underlying asset. The authenticity of the underlying assets is a necessary prerequisite to ensure the smooth operation of asset securitization. There are many participants in asset securitization, including original equity holders, plan managers, custodians, regulators, asset service agencies, law firms, rating agencies, accounting firms, investors, etc., and there may be information asymmetry between various entities, resulting in operational risks and moral hazards. In the traditional asset securitization trading model, most projects require manual review of the underlying assets one by one, which cannot effectively guarantee the authenticity of the underlying assets. The basic asset information reviewed is generally provided by the financing entity, that is, the original equity holder, who may provide false materials to obtain higher financing returns.
Second, the process of obtaining and synchronizing intermediary data and documents is cumbersome and complex. In the asset securitization product design, due diligence and issuance stage, due to the lack of standard data circulation processes, and the difficulty of docking the business systems of each participant, all parties will produce certain information losses in the process of obtaining, processing and displaying data.
In addition, the supervision of the duration is more difficult. In view of the structural design of asset securitization products, the plan manager often entrusts the original equity holder, that is, the financing entity, as the asset service institution of the special plan to provide management services and other services related to the underlying assets and their recovery during the existence of the special plan. Therefore, the recovery of the underlying assets will generally still enter the operating account opened by the financing entity itself, and there may be a risk of mixed funds. At the same time, the asset management reports that the program manager regularly prepares and discloses to investors rely heavily on the underlying asset data provided by the asset service provider. During the existence of the special plan, regulators and investors cannot timely and accurately understand the relevant information of the underlying assets, and it is difficult to supervise during the existence period.
Empower asset securitization with blockchain technology
Blockchain technology combined with asset securitization refers to the clear and true recording of the underlying assets of asset securitization in each node of the blockchain network through blockchain technology, so that all participants in the project can see through the basic assets of the project and fully disclose information, so that the credit rating of the subject and the credit rating of the project are separated.
Used in the asset securitization business, blockchain mainly has the following advantages:
First, eliminate information asymmetry and improve the authenticity of basic assets. Blockchain technology can effectively solve the problem of asymmetric information in asset securitization business and improve the authenticity of basic assets. Blockchain is used in asset securitization business, and the original owner writes the various processes of the business involved in the underlying assets into the network node of the blockchain, so that the information cannot be tampered with once uploaded, thus solving the authenticity problem of the data source. At the same time, other participants in asset securitization can clearly and intuitively understand the underlying assets, so as to achieve transparent and open information.
Second, improve the efficiency of asset securitization. Each participant can use blockchain technology to quickly and effectively obtain data, effectively reduce the information loss caused by the data circulation process, and improve the efficiency of data acquisition; secondly, visualize all the information and data of the underlying assets, which can quickly and effectively screen out assets that meet the qualification standards, and use the unique smart contract function of the blockchain to set each time threshold, money threshold, credit enhancement mechanism and other links in the process, and meet the corresponding conditions to trigger the corresponding mechanism according to the arrangement of the transaction structure. To ensure the smooth operation of the asset securitization process and improve the efficiency of asset securitization.
Third, improve the transparency of life-of-life information. By realizing strict tracking and monitoring of the existence of the entire asset pool, the blockchain provides a transparent and secure platform for securitization products and the market, so that the recovery of the underlying assets and the distribution of cash flow during the existence period are carried out in a more transparent manner, reducing the risk of the original equity person's funds being mixed, and helping the plan manager to carry out risk monitoring and early warning in post-loan management. At the same time, investors and regulators can also view at any time, accurately understand the product status management of each time node, and timely understand the systemic risks of the project.
Looking forward to blockchain + asset securitization
On October 24, the Political Bureau of the CPC Central Committee conducted the 18th collective study on the development status and trend of blockchain technology, and Xi Jinping, general secretary of the CPC Central Committee, said when presiding over the study, "The application of blockchain technology has been extended to digital finance, Internet of Things, intelligent manufacturing, supply chain management, digital asset trading and other fields."
For asset securitization, the combination with blockchain technology can greatly reduce the problem of information asymmetry, so the application of blockchain will have an immeasurable impact on asset securitization. At present, China's blockchain-related applications in the field of asset securitization are still in the early stage of development, accompanied by more and more attempts and explorations, it is expected that blockchain technology will be more widely used in the field of asset securitization and play a positive and practical role.
(AllBright Law Offices senior lawyer Peng Xin also contributed to this article)