KfW Partners with Boerse Stuttgart Digital for Blockchain-Based Bond Issuance in ECB Trial
Germany’s largest development bank, KfW, is set to issue a blockchain-based digital bond in the coming weeks, partnering with Boerse Stuttgart Digital (BSD) as its infrastructure provider. This initiative is part of the European Central Bank’s (ECB) trials to settle blockchain-based transactions against central bank money, marking a significant step in the digitalization of financial markets.
BSD will manage the crypto wallets and secure private keys throughout the issuance and redemption processes for the bond, which will be issued under the German Electronic Securities Act (eWpG). This collaboration underscores the growing trend of traditional financial institutions exploring blockchain technology for issuing and settling financial instruments.
Gaetano Panno, Head of Transaction Management at KfW, emphasized the bank’s commitment to driving digitalization in the issuing and settlement process. “The utilization of new technologies as part of the ECB trials enables us to technically process a ‘delivery vs. payment’ transaction and thus supports our digital learning journey,” Panno stated.
This upcoming bond issuance follows KfW’s previous tokenized security offering in July, a €100 million digital bond issued on the Polygon network. The new issuance will involve a bookrunner consortium consisting of DZ Bank, Deutsche Bank, LBBW, and Bankhaus Metzler, with Union Investments as an anchor investor.
Ulli Spankowski, Managing Director of Boerse Stuttgart Digital, highlighted the significance of this partnership, stating, “The expansion of our offering for institutional clients and our involvement in KfW’s next blockchain-based digital bond mark a milestone in the digital transformation of the financial sector.”
The bond issuance will utilize the Bundesbank’s “Trigger Solution,” a technical framework connecting blockchain-based systems with traditional payment systems like Target2. This integration allows for efficient and secure processing of digital securities within established European payment infrastructures.
As part of the ECB’s wholesale DLT settlement trials, this initiative represents a crucial step in exploring the potential of blockchain technology in traditional finance. It aims to leverage the benefits of DLT, such as faster and more transparent transaction settlements, lower costs, and increased efficiency.
