KfW, the German state-owned development bank, plans to issue a tokenized bond in 2024. Technically KfW issued a digital bond this year, a €20 million issuance using Deutsche Börse’s Clearstream. However, the digital storage on Clearstream’s D7 platform used a centralized security depository.
Germany’s digital securities legislation eWpG supports both centralized and decentralized digital depositories that use blockchain. In the latter case, Germany refers to them as crypto securities. Hence, this is what KfW is planning next year.
The International Financing Review reported that KfW discussed the tokenized bond in a briefing. Germany’s Union Investment will once again be an anchor investor for the KfW tokenized bond. The German asset manager has been a prolific investor in tokenized bonds – starting from the first European Investment Bank (EIB) bond to the Siemens bond, and Metzler’s tokenized fund units. KfW’s treasurer, Tim Armbruster, said the focus was on the learning experience.
If other bond issuances are anything to go by, the first is often the most painful. That’s not from a technical point of view but pinning down the legal issues. If the issuance also uses Clearstream’s D7, it could be D7’s first crypto security. So far D7 has been used for several thousand digital issuances, but all on the centralized depository.
Meanwhile, Cashlink recently published a review of the cost savings from digital bonds. Cashlink is a German crypto securities registry startup and the most prolific platform for bonds. It was involved in the recent Metzler fund tokenization.
