Banco Santander Issues $2M Bond On Ethereum
Santander, a Spanish banking giant, announced that it has issued the first-ever end-to-end blockchain bond. The bond will remain on the blockchain for a year until it matures.
The $20 million bond was issued on the Ethereum blockchain. Its issuance was represented using an Ethereum based token.
According to a report by Coinbase, the settlement was made using ERC-20 tokens that represented cash held in a custody account. Every aspect of the process was automated, digitised, and done on the blockchain.
Santander said that the issuance of the $20 million bond is a significant step towards the secure tokenisation of the bond and its registration on a permissioned manner on the blockchain.
Here is what Santander said in a press release:
“The cash used to complete the investment (on-chain delivery-versus-payment) and the quarterly coupons have also been tokenised, i.e. represented digitally on the blockchain. Thanks to this automation, the one-year maturity bond has reduced the number of intermediaries required in the process, making the transaction faster, more efficient, and simpler.”
Banco Santander issued the bond while Santander Security Services acted as the custodian of the cryptographic keys as well as the tokenisation agent. The dealer for the issuance was Santander corporate and investment banking (CIB).
Jose Maria Linares, the global head of Santander Corporate & investment banking, had the following to say:
“Our clients are increasingly demanding the best thinking and technology in how we serve them in their capital raising efforts. This blockchain issued bond puts Santander at the forefront of capital markets innovation and demonstrates to clients that we are the best partner to support them on their digital journey.”
Jose Garcia Cantera, the CFO of Banco Santander added:
“Santander is at the forefront of the profound digital transformation of the financial sector and this transaction is one example. We want to take advantage of any technology that can accelerate that process, so that our customers thrive and be faster and more efficient, and blockchain is one of those technologies.”
Nivaura also participated in the project. Nivaura is a RegTech startup that was selected in the fourth cohort of the UK financial conduct authority’s regulatory sandbox. The company helped with the digitisation of the issuance.
Nivaura’s CEO Avtar Sehra told Coindesk that “this is not really digitising a bond, all you are really doing is digitising the process for registration and settlement and even for the settlement part you are only addressing half the problem because you haven’t got cash on the blockchain.”
Nivaura digitises the negotiations and documentation surrounding issuance in such a way that the data is encrypted and each party can only access specific fields in the document.
“That’s the key significance of what Santander is doing here. They are saying ‘let’s digitise the entire process’. We are not now doing the bond construction in the old fashioned way, inputting data manually in an insecure fashion into a blockchain to tokenise it and doing the same with cash. That’s absurd.” Said Sehra.
He further added:
“The Santander execution is the first truly digital front to back execution process, which securely uses relevant data to tokenise both the assets and cash to enable on-chain settlement and coupon payments.”
Last month the World Bank used blockchain technology to raise about 33 million US dollars for its Kangaroo bond. The bond is due in August 2020.
Santander’s efforts and those of other institutions doing similar things is a clear indication that the Ethereum blockchain is slowly winning the trust of the banking system.
About the author:
Jay Jackson is a blockchain enthusiast and a freelance writer at topcryptowriter.com. He works closely with brands (people, businesses and startups) in the crypto sphere. He currently writes Blog posts, Guides, Press releases, ICO reviews, eBooks & Whitepapers. You can find him on LinkedIn.
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Last updated: 15/09/2019