Siemens issues first blockchain-based digital bond
Europe’s largest industrial manufacturer Siemens rolled out a digital bond on a blockchain worth 60 million euros. With a one-year maturity, Siemens said a blockchain-based digital bond would offer a number of benefits, such as enabling direct sales to investors without the need for an intermediary.
Blockchain-based bonds eliminate the need for banks and intermediaries, says Siemens
Siemens issued a blockchain-powered digital bond worth 60 million euros on Tuesday, the company said in a press release. The bond, launched in accordance with Germany’s Electronic Securities Act, has a maturity of one year.
Siemens said issuing the bond on a blockchain offers several advantages, including eliminating the need for paper-based global certificates and central clearing. In addition, it allows the company to sell the bond directly to investors without an intermediary bank.
Siemens CFO Ralf P. Thomas stated that the company’s success in supporting customers’ digital transformation made it “only logical that we test and use the latest digital solutions in finance.”
“We are proud to be one of the first German companies to issue a blockchain-based bond. This makes Siemens a pioneer in the ongoing development of digital solutions for the capital and securities market.”
– Ralf P. Thomas, Siemens CFO said in the press release.
Siemens said the introduction of the Electronic Securities Act in June 2021 made it possible to issue digital bonds on the blockchain in Germany and allowed the company to sell securities directly to investors without employing established central securities depositories. Payments for the securities were made using conventional methods since the digital euro was not yet available at the time of the transaction. The entire transaction was completed within two days, Siemens added in the release.
“By moving away from paper and towards public blockchains for the issuance of securities, we can execute transactions significantly faster and more efficiently than when issuing bonds in the past. ”
– said Peter Rathgeb, Corporate Treasurer of Siemens AG.
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The Importance and Growth of Tokenization
Siemens’ foray into blockchain and tokenized bonds comes amid an important period for real-world asset (RWA) tokenization. This process involves representing physical and traditional financial assets as digital tokens on a blockchain. RWA is proving to be a promising growth area for the digital asset industry in 2023 as it opens up a safer, inclusive and efficient investment environment for investors.
This is because blockchain and distributed ledger technology (DLT) have many potential benefits beyond cryptocurrencies, one of which is tokenization. This concept has the potential to unlock several benefits, including increased liquidity and availability of assets, reduced transaction costs, and improved transparency and security.
By representing assets as digital tokens on a blockchain, investors can trade and exchange them more efficiently and at a lower cost than traditional methods. Recent research by global consulting firm BC showed that the cumulative size of tokenized assets globally could reach a staggering $16 trillion by 2030.
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About the author
Tim Fries is the co-founder of The Tokenist. He has a B. Sc. in mechanical engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate in the investment team at RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
