€60 Million ($65 M) Digital Bond on Public Blockchain by Siemens
- The German conglomerate issued digital bonds with the Polygon public blockchain.
- They also used blockchains as bank guarantees in 2018.
Digital securities have recently become a big buzz in financial markets around the world. Everyone is trying to get a piece of the pie; large companies enter the arena. Joining the race is the German multinational conglomerate that works to produce and supply power generation and transmission systems together with Siemens medical diagnostics. They issued a 60 million euro ($65 million) digital bond with the Polygon public blockchain.
The bond issue was organized by Hauck Aufhauser Lampe Privatbank, which acted as bond registrar, and provided a digital custody solution for the keys. DekaBank, Union Investment and DZ Bank bought this bond.
This tokenized bond is issued under eWpG legislation for digital native electronic securities in Germany, adopted in mid-2021. It supports both distributed blockchains and centralized ledgers. Deutsche Borse used its D7 platform for several issues, but they have been a centralized ledger.
Along with providing a shared ledger and reducing reconciliation needs, blockchain securities are issued directly to investors by bypassing costs and removing intermediaries. This step made Siemens the first major company to issue a digital native bond over a public blockchain. Moreover, many are already revealing more private blockchains.
The main public blockchain issuance to date was only by large banks; the list includes Societe Generale, European Investment Bank and Santander. ABN Amro also made issues to certain smaller corporate customers. Although Hauck Aufhauser Lampe Privatbank may not be the first name that strikes the mind for tokenized securities, their digital assets unit that Simon Seiter heads, he also led the digital assets unit for Deutsche Borse for two years until September 2021.
Siemens has been known for innovation; some say it’s embedded in the company’s DNA. There has been significant participation by them in blockchain initiatives for years. They even used blockchains as bank guarantees in 2018; their recent partnership with JP Morgan’s Onyx unit to facilitate blockchain-based payments was notable.
The bond has a maturity period of one year and is validated by a public blockchain. This release comes with additional benefits compared to previous iterations. It would make paper-based global certificates and central clearing obsolete. Even without the bank needing to act as an intermediary, the bond can be sold directly to investors.
Thomas said the company is known for its innovative technologies and products and is committed to supporting digital transformation for its customers. Data shows that they are succeeding in this endeavour. The entry of the Electronic Securities Act in June 2021 enabled the issuance of blockchain-based digital bonds in Germany.
The conglomerate used the law’s latest opportunities and sold securities directly to investors, bypassing well-established securities central offices. Although the payment evolved from traditional methods, as digital euros were not available at the time of the transaction and it took two days to complete.
Corporate Treasurer at Siemens AG says that with the shift from paper-based to public blockchain method of securities issuance, the execution of transactions became faster. Moreover, it is more efficient than previous bond issues. This was made possible by a successful collaboration with the partners, which enabled them to reach this important milestone for the development of digital securities in Germany.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional money exchange systems. She is also fascinated by the blockchain technology and its function.
