The fifth-largest bank in Europe, Banco Santander, is the first financial institution to issue an “end-to-end” debt-based bond on Ethereum’s public blockchain. The move is an indicator of ETH’s growing importance in finance.
A $20 million tokenized bond
With the help of Nivaura, a London-based fintech, the Spanish banking giant developed a token to represent a $20 million debt issuance. The firm used a range of ERC-20 tokens that constitute cash to settle the security. Santander Security Services will hold custody of the cryptographic keys for the tokenized bond and tokenized cash.
The transaction was made for one of the most basic types of bonds and will exist on the Ethereum blockchain until maturity, which is set for one year from now. It will also carry a quarterly coupon at a standard rate of 1.98 percent, according to Antonio Torio, head of funding at Santander.
José García Cantera, chief financial officer at Banco Santander said:
“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.”
By automating all the documentation and negotiations that are involved in issuing a bond, Santander will be able to make the process more efficient and faster, consequently eliminating a number of intermediaries.
“That’s the key significance of what Santander is doing here. They are saying ‘let’s digitize the entire process,’” stated Avtar Sehra, CEO of Nivaura.
Although the bank itself is not interested in getting involved with any cryptocurrencies, the technology behind these digital assets is what is the most relevant to them. The “evolutionary step” that Santander has taken towards digitizing processes in the banking sector is more related to a “technology innovation issue than a purely financial issue,” said John Whelan, head of digital investment banking at the firm.
With the help of Ethereum, Banco Santander is on the path to handle more complex transactions using blockchain. This will help the bank provide its clients with one of the most “technologically advanced banking platforms,” concluded Whelan.
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