DZ BANK, acting as issuer, and KfW, as investor, have completed a crypto security issuance under Germany’s Electronic Securities Act (eWpG) using a Smart Bond Contract (SBC).
The transaction mapped the full lifecycle of a digital bond on blockchain infrastructure, from initial liquidity demand to issuance and settlement.
Smart Bond Contracts (SBCs) use algorithms to coordinate participants’ actions based on predefined conditions, automating processes across the bond’s lifecycle.
They run on distributed ledger technology (DLT), which provides a shared, tamper-resistant record of transactions and enables automatic execution, such as triggering payments when conditions are met.
“This transaction marks a genuine innovation in the financial market,”
said Matthias Bergner, Head of Treasury at DZ BANK.
“Together with our offerings in the field of digital assets, it underscores our leading role in the German banking sector within the entire digital securities universe.”
KfW has previously participated in digital bond issuances both as issuer and investor.
The bank views such transactions as part of its broader efforts to support financial market digitalisation and test new infrastructure.
“We were pleased to participate in this project, as this transaction represents another milestone on our learning journey towards Europe’s digital sovereignty,”
said KfW Treasurer Tim Armbruster.
“To keep the German and European financial markets competitive, we need scalable digital products.”
The parties conducted the transaction without a central securities depository. Required service providers contributed data directly to the DLT system.
Blockchain served as the primary communication layer, ensuring that transaction data remained immutable and visible to all participants.
The pilot, executed on the Polygon blockchain, included automated ISIN assignment by WM Datenservice and digital registry services by Cashlink.
The Deutsche Bundesbank’s trigger solution carried out settlement, linking blockchain processes with central bank balances.
The transaction completed in around one hour, compared with the approximately five days required for a traditional bond.
Featured image credit: Edited by Fintech News Switzerland, based on image by freepik
