Siemens’ €300M Blockchain-Bond Sets Precedent for Future Securities Issuance, Top German Banks On Board
Siemens settled its €300 million bond in minutes thanks to blockchain technology. (Photo by Karl-Josef Hildenbrand/picture alliance via Getty Images)
Key Takeaways
- German tech giant Siemens AG launches its second blockchain-based security bond.
- The security bond was the first fully automated settlement in minutes.
- The popularity of DLT has made it a growing choice for financial institutions for bond issuance and settlement.
Siemens, the German industrial giant, has issued a €300 million ($332 million) digital bond , its second such transaction.
Part of the European Central Bank’s initiative to explore private blockchains for securities settlement, the bond is a test case for the technology’s viability in mainstream finance.
And with major German banks on board, Siemens is looking to set a powerful precedent for the industry.
Siemens On-board Top German Banks
The €300 million digital bond, which has a one-year maturity, was settled on a private blockchain called SWIAT and made possible by the Bundesbank’s Trigger Solution.
A group of major German banks, including DekaBank, Helaba, LBBW, DZ BANK, and BayernLB, participated in the securities bond settlement. DekaBank served as the bond registrar, and Deutsche Bank used the Bundesbank Trigger Solution to ensure settlement in central bank currency.
The transaction marked a significant step forward in using blockchain technology for securities settlement. The bond was classified as a crypto security under Germany’s Electronic Securities Act (EPG). The issuance increased the total volume of eWpG digital securities to over €530 million ($588 million).
A Drastic Improvement
Interestingly, the bond was verified in just a few minutes, a significant reduction in processing time compared with Siemens’ previous digital bond issuance on the Polygon blockchain.
That €60 million transaction, conducted last year, reportedly took about two days to settle.
Ralf P. Thomas, Siemens AG’s Chief Financial Officer, said the company’s latest bond issuance and settlement proves it is a pioneer in applying the latest technologies to the capital and securities markets.
Thomas lauded the use of Distributed Ledger Technology (DLT) to settle securities in real-time. He said that the automated processing within a few minutes “shows the enormous potential of this new technology and confirms our strategy of playing a leading role in continuously shaping the digital transformation.”
Blockchain Securities a Growing Trend in Europe
Europe is taking the lead in adopting blockchain and digital asset technology, with the European Union’s Markets in Crypto Assets (MiCA) regulations providing a unified framework for innovation.
In addition to Siemens, several other major European financial institutions are exploring blockchain technology for securities settlement.
For example, in July, KfW, a government-owned German bank, issued a €100 million blockchain bond on the Polygon blockchain. The bank claimed it is the first syndicated crypto security in Germany. The state-owned bank also revealed plans to launch a €4 billion ($4.28bn) digital bond.
The growing adoption of blockchain technology in the financial sector is being driven by the need for greater efficiency and speed in transactions. Despite some regulatory hurdles, the nascent technology is gaining traction in Europe, with central banks and traditional financial institutions recognizing its potential benefits.
