Spanish banking group Banco Santander has issued what it claims to be the first end-to-end blockchain bond.
Santander said in a note that it had issued the $20m bond directly onto the Ethereum blockchain, where it remain until the end of its one-year maturity.
According to Santander, this use of blockchain technology for the end-to-end bond issuance is a first step towards a potential secondary market for mainstream security tokens.
This blockchain-issued bond puts Santander at the forefront of capital markets innovation and demonstrates to clients that we are the best partner to support them on their digital journey,” José María Linares
While Banco Santander is itself the issuer of the bond, one of the Group's units purchased the debt instrument at market price. It carries a quarterly coupon of 1,98%.
Santander Securities Services is operating as tokenisation agent and custodian of the cryptographic keys while Santander Corporate and Investment Banking (CIB) acted as a dealer.
The transaction has been conducted through the public Ethereum blockchain, allowing Santander to tokenise the bond securely and registering it in a permissioned manner. Both the cash used to complete the investment (on-chain delivery-versus-payment) and the quarterly coupons have also been tokenised, with Santander noting that this automation has enabled the one-year maturity bond to reduce the number of intermediaries required in the process.
"Making the transaction faster, more efficient and simpler than legacy systems, the goal for Santander CIB is to engage with our most innovative clients as we move from the project stage to product development," said Santander CIB.
José García Cantera, CFO 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."
José María Linares, global head of Santander Corporate & Investment Banking, added: "Our clients are increasingly demanding the best thinking and technology in how we serve them in their capital-raising efforts.
"This blockchain-issued bond puts Santander at the forefront of capital markets innovation and demonstrates to clients that we are the best partner to support them on their digital journey."
Santander has received for this transaction support from London-based start-up Nivaura (backed by the venture capital fund Santander InnoVentures) and legal advice from global law firm Allen & Overy.