On September 12, 2019, Banco Santander, the Spanish Banking Behemoth announced that it has launched the first blockchain bond. It added that the bank had issued the bond directly to the blockchain and it will continue to exist in the blockchain itself. According to the sources, this is the first step towards tokenizing the bond securely.
Santander claims that they are the first financial institution which has taken this step of digitizing the process of bond issuance on a public platform. Santander used the public Ethereum blockchain, which is one of the most advanced open blockchain technologies till date. This allows Santander to tokenize the bond securely and also to register it properly on the blockchain. The Ethereum token was used to represent the $20 million debt processing. The most interesting part of the deal is that another Ethereum token ERC 20 was used to settle the same bond. All the cash represented by both sets of tokens were taken for custody later on.
This automation has made the process simpler and faster by reducing the number of intermediaries previously involved in the process, thereby delaying them unnecessarily. However, this is not the first time that Santander is using blockchain technology. It has issued $20 million bonds which were purchased by the Group’s unit at market price. The whole process was conducted on a private Ethereum protocol. This is the first time Santander is issuing bonds using the public Ethereum blockchain.
Antonio Torio, the head of funding at Santander refers to this project as a “real money pilot.” This is more of a technology innovation than it is of a financial issue. The bank also clarified at a meet that though the process involves cryptocurrency technology, the bank as of now is not interested in the same. The bank will focus more on engaging with innovative clients to support them in their digital journey and to transform the process from product stage to the development stage. London based startup company Nivaura supported Santander in this blockchain project.