Industrial giant Siemens issues €60 million digital bond on blockchain

varsha sarkar

May 12, 2023

2:23 pm

Siemens, the largest industrial manufacturer in Europe, has taken a step towards digitalization by issuing its first digital bond on a public blockchain. The bond, worth 60 million euros ($64 million), has a maturity of one year in accordance with the Electronic Securities Act of Germany. The company chose Polygon’s public mainnet as the blockchain to issue the bond, with the intention of reducing intermediaries and expanding its investor base. The Electronic Securities Act, which came into force in June 2021, enables the issuance of securities in electronic form, eliminating the need for physical securities certificates. This move towards digitalization makes paperwork more efficient and offers a range of benefits, including faster execution of transactions and wider access to capital markets.

Siemens’ decision to issue a digital bond on a public blockchain using Polygon’s mainnet is expected to streamline the paperwork involved in bond issuance, thereby making the process more efficient. The move also eliminates the need for a central clearinghouse, which could help reduce costs for the company. However, the press release did not mention the interest rate on the bond.

The digital bond attracted several investors, including DekaBank, DZ Bank, and Union Investment. While payments for the bond were made using traditional methods since the digital euro is not yet available, the transaction was completed within two days. Although a Polygon spokesperson confirmed the transaction, they declined to provide further details, including transaction IDs. Overall, the successful issuance of the digital bond on a public blockchain marks a significant milestone for Siemens and underscores the growing popularity of blockchain-based financial instruments among major global players.

Peter Rathgeb, corporate treasurer at Siemens, stated that the decision to issue a digital bond on a public blockchain was aimed at reducing intermediaries and accessing a wider pool of buyers. He emphasized the benefits of the move, saying that it would make transactions significantly faster and more efficient than when issuing bonds in the past. This is in line with Germany’s Electronic Securities Act, which allows for the issuance of securities in electronic form, eliminating the need for physical certificates and making paperwork more efficient.

Siemens has been involved in blockchain-based projects before, collaborating with JPMorgan in 2021 to develop a blockchain system to manage payments between its own accounts. This experience may have contributed to the decision to issue a digital bond on a public blockchain.

Sandeep Nailwal, Polygon’s CEO, expressed surprise that Siemens had chosen the Polygon network for its digital bond issuance. He added that this was a testament to the growing popularity of institutional DeFi, and that Polygon was becoming a hub for such activities.

European banking institutions have been increasingly interested in issuing digital bonds on blockchain technology. The European Investment Bank, for example, has already issued two such bonds. The first bond was announced in 2021 and was deployed on the Ethereum blockchain. The second bond was issued on HSBC’s tokenization platform, with a secondary record issued on Ethereum, according to press materials.

Other European banks have also been active in this space. Société Générale and Santander have issued bonds on the Ethereum blockchain, while Swiss bank UBS launched a similar bond using both blockchain-based and traditional exchanges. More recently, ABN Amro issued a corporate bond on an undisclosed public blockchain, with custody assistance provided by Fireblocks.

The issuance of Siemens’ first digital bond on a public blockchain marks an important step towards more efficient and streamlined processes for the issuance of securities. By leveraging blockchain technology, Siemens was able to execute the transaction much faster and more efficiently than traditional bond issuances. This move towards digital bonds is not unique to Siemens, as other European banks, including the European Investment Bank, Société Générale, Santander, UBS, and ABN Amro, have also issued bonds on blockchain technology in recent years.

Overall, the trend towards digital bonds suggests that more traditional forms of securities issuance may soon become obsolete. By leveraging blockchain technology, financial institutions can eliminate intermediaries, reduce costs, and streamline processes, making it easier for investors to access a wider pool of assets. The future of securities issuance looks increasingly digital, and it is likely that we will see many more issuances of digital bonds in the coming years.

varsha sarkar

May 12, 2023

2:23 pm

Related Articles

The Essential Skill for Success in the AI Era: Insights from a Millionaire Entrepreneur

April 15, 2024

Embracing the AI Revolution As we navigate the transformative landscape of artificial...

Read More

TikTok’s US Fate: An Uncertain Journey Amidst EU Politicians’ Affection

April 15, 2024

The Intrigue of TikTok in the Global Arena TikTok, the social media...

Read More

Leveraging AI for Enhanced Corporate Cybersecurity: Insights from Google Survey

April 15, 2024

Introduction to AI in Cybersecurity In the ever-evolving landscape of cybersecurity, Artificial...

Read More