Capital markets News

Government-owned KfW elaborates on blockchain digital bond plans


Last year, we reported that the state-owned German bank KfW was planning to issue a blockchain-based digital bond. This week the bank shared a few more details. Given its shareholders, it aims to demonstrate digitalization and increase the profile of crypto securities, the German legal term for securities issued on a blockchain.

The bond will be issued under the German Electronic Securities Act (eWpG) during the summer of 2024, with Cashlink as the registrar. Under the law, the registar in some ways takes the place of a central securities depository (CSD) with fewer requirements. As previously announced, Union Investment will be the anchor investor, as it has been in many of the early European digital bond issuances.

KfW has put together a bookrunner consortium consisting of DZ Bank, Deutsche Bank, LBBW and Bankhaus Metzler, which all have blockchain experience.  DZ Bank will also be the collective registered holder of the bond. The bond settlement will be executed in the traditional fashion.

“The initial goal on the road to the digitalisation of refinancing is to learn and thereby identifying potential for improvement,” said Tim Armbruster, Treasurer at KfW, “We believe that digitalisation will be advantageous in terms of increased efficiency and scalability,” said Armbruster.

While this will be KfW’s first crypto bond, it previously issued a digital bond on Deutsche Börse’s D7, which involves the Clearstream central securities depository (CSD).

It also says it’s working with the Luxembourg-based NowCM digital bond issuance platform. Early last year, NowCM bought Nivaura, the capital markets automation firm backed by the London Stock Exchange. Nivaura provided a workflow for bond issuance as part of a DLT-ready solution.

After publication KfW confirmed the Polygon public blockchain will be used for the issuance.

Update: added that Polygon is the chosen blockchain