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This state-owned German bank enters the crypto sector with a new Blockchain-based digital bond
State-owned German development bank Kreditanstalt für Wiederaufbau (KfW) is preparing to issue its first blockchain-based coin digital bondmarking a significant milestone in the adoption of cryptographic technology in the financial sector.
According to a recent relationship from Bloomberg, KfW has already successfully issued a digital bond as a central register security in accordance with the German Electronic Securities Act (eWpG). The bank is preparing to take the next step by offering a blockchain-based bond to attract a wide range of investors.
Simplified offering of crypto bonds
Treasurer Tim Armbruster expressed optimism about the benefits of digitalisation in terms of greater efficiency and scalability. Recognizing these potential benefits, KfW aims to exploit blockchain technology streamline and scale up the bond issuance process.
KfW plans to hold discussions during a preparatory phase of several weeks to familiarize European institutional investors with the upcoming transaction.
This will reportedly allow investors ample time to understand and evaluate the opportunities presented by blockchain-based bonds. Union Investment, an experienced cryptocurrency investor, was announced as the lead investor in this deal.
According to the report, while the bond issue will be in digital format, KfW will continue to process payments using traditional payment systems. The transaction is expected to be finalized in the summer of this year.
An anonymous source reveals an expected bond of 100 million euros
Several major financial institutions have been enlisted to facilitate bond issuance. DZ Bank, Deutsche Bank, LBBW and Bankhaus Metzler will act as joint bookrunners and oversee the process. Frankfurt-based fintech company Cashlink Technologies GmbH will be the registrar of the crypto assets.
While specific details about the bond remain under wraps, an anonymous source familiar with the matter revealed that the expected minimum size will be 100 million euros ($108 million). The bond is expected to mature in December 2025, providing investors with a defined timeline for their investment.
KfW’s move follows in the footsteps of JPMorgan, which recently ventured into the cryptocurrency market using blockchain technology to offer municipal bonds to investors. This move reflects the growing recognition of blockchain’s potential to revolutionize traditional financial operations.
KfW’s pioneering issuance of a blockchain-based digital bond sets a precedent for other financial institutions to explore similar avenues.
The successful implementation of this technology could lead to greater efficiency and accessibility in the bond market, ultimately transforming the way cryptocurrencies are issued and traded among traditional financial institutions.
As of this writing, the cryptocurrency market is valued at $2.2 trillion. Bitcoin (BTC), the largest cryptocurrency in terms of market capitalization, is currently trading at $63,200.
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