The $20 million bond opens the door to new disruptive technology that can make issuing bonds faster, more efficient and simpler
Santander launches the first end-to-end blockchain bond. Source: shutterstock.com
Banco Santander announced that it has issued the first end-to-end blockchain bond. The bond was issued directly onto the blockchain and it will also continue to exist only on the blockchain.
Banco Santander is itself the issuer of the $20 million bond, while one of the Group’s units purchased the bond at market price. The bond carries a quarterly coupon of 1,98%. Santander Securities Services is acting as tokenization agent and custodian of the cryptographic keys. Santander Corporate and Investment Banking (CIB), the bank’s global division that supports corporate and institutional clients, acted as a dealer for the issuance, continuing the work which started in Santander’s blockchain lab in 2016.
Santander used the public Ethereum blockchain, one of the more advanced open-source blockchain technologies. This allows the bank to achieve the milestone of tokenizing the bond securely and registering it in a permissioned manner on the blockchain. The cash used to complete the investment (on-chain delivery-versus-payment) and the quarterly coupons have also been tokenized, 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 more efficient.
For this project, Santander received support from London based startup Nivaura, a regulated fintech company which builds innovative solutions that digitize and automate key processes in capital markets, as well as legal advice from global law firm Allen & Overy. Santander InnoVentures, the $200 million venture capital fund, invested last February in Nivaura.
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