- The German conglomerate issued digital bonds with Polygon public blockchain.
- They also used blockchains as bank guarantees in 2018.
Digital securities have lately become a huge buzz in financial markets worldwide. Everyone is trying to get a slice of the pie; major corporates are entering the arena. Joining the race is the German multinational conglomerate working in producing and supplying power generation and transmission systems along with the medical diagnostics Siemens. They issued a €60 million ($65 M) digital bond with Polygon public blockchain.
The bond issuance was organized by Hauck Aufhauser Lampe Privatbank, acting as the bond registrar, providing a digital asset custody solution for the keys. DekaBank, Union Investment and DZ Bank bought this bond.
This tokenized bond is issued under eWpG legislation for digital native electronic securities of Germany, passed in mid-2021. It supports both distributed blockchains and centralized ledgers. Deutsche Borse used its D7 platform for multiple issuances, but they have been a centralized ledger.
Along with providing a shared ledger and reducing reconciliation needs, blockchain securities are directly issued to investors by sidestepping the cost and removing intermediaries. This step made Siemens the first huge corporation to issue a digital native bond over a public blockchain. Moreover, many are divulging on multiple private blockchains already.
The main public blockchain issuance to date was by major banks only; the list includes Societe Generale, European Investment Bank and Santander. ABN Amro also conducted issuance to certain smaller corporate clients. Although Hauck Aufhauser Lampe Privatbank might not be the first name striking in mind for tokenized securities, their digital assets unit which Simon Seiter heads, he also led the digital assets unit for Deutsche Borse for two years till September 2021.
Siemens has been known for innovation; some say it is integral to the company’s DNA. There has been considerable participation by them in blockchain initiatives for years. They even used blockchains as bank guarantees in 2018; their recent partnership with JP Morgan’s Onyx unit facilitating blockchain-based payments was noteworthy.
Bond has a maturity period of a year and is validated by a public blockchain. This issuance comes with added benefits versus previous iterations. It would make paper-based global certificates and central clearing obsolete. Even without the need for the bank to act as an intermediary, the bond can be sold directly to investors.
Thomas said that the company is well known for its innovative technologies and products and is committed to supporting digital transformation for its customers. Data shows they are successful in this endeavor. The advent of the Electronic Securities Act in June 2021 made possible the issuance of blockchain-based digital bonds in Germany.
The conglomerate utilized the latest possibilities of the act and sold securities directly to the investors, circumventing well-established central securities depositories. Although the payment evolved from traditional methods as digital euro was not available at the time of the transactions, and it took two days for it to complete.
The Corporate Treasurer at Siemens AG says that with the shift from paper-based to public blockchain method for securities issuance, the execution of transactions became faster. Moreover, it’s more efficient than past issuance of bonds. This was made possible with successful cooperation with the partners, allowing them to reach this key milestone for developing digital securities in Germany.
