The multinational commercial bank Santander led by Ana Botin is about to open a promising path to agricultural credit. The Agribusiness branch of Santander in Argentina partnered with Agrotoken, the first global infrastructure in tokenizing agricultural products. The alliance consists of developing various blockchain-based financial products for agricultural producers.
The first product is a loan collateralized with tokenized soy, wheat, and corn (i.e., SOYA, WHEA, CORA tokens). “This is the first time a financial services platform utilizes crypto-assets and blockchain to broaden the agricultural credit market and free the potential of agribusiness,” said Fernando Bautista, chief of Agribusiness in Santander Argentina.
In this process, Agrotoken mints the stablecoins after the producer delivers the product to a grain collector and verification occurs using the Proof of Grain Reserve consensus. When the grain is removed from silos, the equivalent amount of stablecoins is burnt.
One Agrotoken is equivalent to a ton of grain and farmers can exchange the tokens for seeds, fuel, vehicles, machinery, and other primary products. Currently, the stablecoins are minted on Ethereum, Polygon, and Algorand blockchains.
Despite the novelty embodied in this scheme, it entails a few risks, for instance, ensuring that the same grain is not collateralizing multiple credits or that the grains are not withdrawn from the warehouse.
Nonetheless, Santander and Agrotoken declared they are running a pilot test with agricultural producers to validate the technical and operational schemes. In designing the business model for the crypto-backed loans, the duo onboarded the business and financial consultancy firm: Accenture.
The plans of Santander are more ambitious since the Spanish financial institution announced the investment of $225 million for developments in Latin America and the expansion of the crypto-backed agricultural loans to Brazil and the United States in this same year.