German State-Owned Bank to Launch Blockchain-Based Digital Bonds

German State-Owned Bank to Launch Blockchain-Based Digital Bonds

The German state-owned bank, Kreditanstalt für Wiederaufbau (KfW), has announced its plans to issue its first blockchain-based digital bonds by summer 2024. These bonds will be managed using blockchain technology to ensure secure and transparent transactions and are classified as crypto securities under the German Electronic Securities Act (eWpG).

KfW has partnered with major financial institutions to facilitate this pioneering initiative. The bond issuance process will involve Union Investment as a key anchor investor, with additional support from a consortium that includes DZ Bank, Deutsche Bank, LBBW, and Bankhaus Metzler. DZ Bank will act as the collective registered holder, and Cashlink Technologies will serve as the crypto securities registrar.

Despite utilizing cutting-edge blockchain technology, the settlement of financial transactions linked to these bonds will still occur through traditional payment systems. Tim Armbruster, KfW Treasurer, highlighted the initiative’s educational value, stating, “The initial goal on the road to the digitalization of refinancing is to learn and thereby identify the potential for improvement.”

This move by KfW aligns with global financial trends where traditional financial operations are increasingly incorporating blockchain technology. Notably, the Bank of China issued blockchain-based bonds in 2019, and Banco Santander launched the world’s first end-to-end blockchain bond the same year. Similarly, Societe Generale and HSBC have also adopted blockchain technology for bond issuance and other financial services.

KfW’s announcement also specifies that these digital bonds will not be offered or sold in the U.S. due to market regulatory restrictions, emphasizing the legal and regulatory complexities associated with global financial innovations.

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