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Daimler to Introduce Payable Debt Notes on Blockchain

March 26, 2020
Ross Peili


Daimler to Introduce Payable Debt Notes on Blockchain

STUTTGART – Daimler, the mother company behind the top-shelf automaker Mercedes is testing its relation to blockchain technology with a new fintech solution developed in association with Deutsch financial services provider LBBW. 

More specifically, the project revolves around a promissory note, otherwise known as a payable note, which is basically a financial instrument, even more particularly a debt instrument. 

A promissory note is essentially a contract between two legal parties. One party is the issuer or the one who promises the subject of the contract, eg. promises to pay a determinate sum of money to the other party, in this case, the payee.

The note can be fixed with a determinate date and time or on demand of the payee, depending on the contract details. 

In a nutshell, LBBW created a digital distributed ledger to issue, store, and manage payable notes, with the first transaction performed yesterday on Wednesday, March 18. A loan worth of €25m and with a term of two years was registered and timestamped on Daimler’s tailored blockchain dubbed “DEBTVISION”.

The two German companies have been testing the network since its development back in 2017, but this was the first legally effective transaction on the DLT platform. The concept was to eliminate the need for time-consuming protocols of the past such as heavy paperwork, physical transferability, and more, blockchain is known to be the best option to tackle with. 

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Daimler is now a financial services provider as well

Additionally, the official press release, cited that the particular transaction was also subject to traditional physical registration processes due to the regulatory uncertainty clouding blockchain technology and its defined use-cases.

Nevertheless, there is a temporal workaround as Targens GmbH, the legal entity behind LBBW, had foreseen the legal issues that might occur during the process and came up with the term “tamper-proof transaction database” which was, at the time of the transaction, accepted under legal frameworks. 

“Blockchain technology offers the potential to make existing financial processes more efficient and transparent. Processing time and transaction costs can be significantly reduced. At the same time, the technology allows to increase the security of transactions and to minimize risks.

Especially in the area of payment transactions, but also in securities transactions, bond issues and trade finance, blockchain technology can bring major efficiency gains in a scalable ecosystem in the medium term,” said Kurt Schäfer, Head of Daimler Treasury.

Furthermore, the PR broke down the process in three key components that make up the system: 

  • Lenders and planners can use the DEBTVISION platform to market a promissory note, promote it and communicate with investors, who on their own turn have access to all the data required in order to place an order electronically.
  • LBBW’s blockchain solution which is linked to DEBTVISION, allows the immutable ledger data to be transparent with all participants, who can store, print, distribute, and monetize documents without time-delays or physical interactions.
  • Thanks to the DLT architecture, Daimler says there is no need for the network participants to transfer individual documents back and forth after placing an order. Instead, the document can be available to all members at any moment, while additional automated contract details can be also integrated within a document, similar to Ethereum-based smart-contracts. 

At the same time, documents can be processed, exchanged and authenticated in real-time and securely inside the private network.

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“With our first fully digital Schuldschein, we have taken another huge step forward in making banking easier, more secure and more efficient for our customers,” said Joachim Erdle, Head of Corporate Finance at LBBW.

While we’ve seen automobile and other industrial companies utilizing blockchain technology manifested by DLT providers before, Daimler is not just using blockchain but it actually enters the scene as a blockchain provider, not to mention the project is a fintech solution and has nothing to do with automobile manufacturing.

It is most likely that Daimler will target the automobile industry to promote its new service, due to its huge network in the sector.  

Analogous solutions have been considered by Honeywell, and Nike in the past.