- First change of registrar, register and blockchain during the term
- KfW continues to expand its expertise in digital financial market processes
- Contribution to the development of robust and future-proof market infrastructure in Europe
Rigorous test for blockchain bonds: For its third crypto security, KfW intends to change both the technical infrastructure and the registrar managing the security during its term. The promotional bank is subjecting key components of the digital financial market infrastructure to a critical practical test under real market conditions. The issue is scheduled for June 2026.
The planned bond is the latest stage of KfW’s learning journey towards the digitalisation of the financial market, which has been ongoing since 2022. It likewise tests the practicality of the German Electronic Securities Act (eWpG). The aim is to develop resilient, scalable structures for the entire life cycle of a crypto security together with market participants. This is based on distributed ledger technology (DLT), of which blockchain is the most well-known form.
During the term of the KfW crypto security, which will be issued this autumn in accordance with the eWpG, the plan is to change both the registrar of the crypto security – from Cashlink to DekaBank – and the underlying infrastructure, from the Polygon blockchain to SWIAT/Regulated Layer One (RL1). This is also intended to provide important impetus for standardisation in the DLT-based capital market.
“By focusing on a seamless exchange of infrastructures and standardisation, KfW is making an important contribution to the scalability of the DLT-based financial market. A scalable digital infrastructure is crucial for significantly strengthening Europe’s competitiveness and digital sovereignty. The fact that we are supported by numerous market partners in this bond issue is proof of KfW’s role as a driving force and pioneer in jointly driving forward the digitalisation of the financial market,”
said Tim Armbruster, Treasurer at KfW.
In addition to changing the infrastructure, KfW will also test new ways of payment processing in central bank funds during the transaction. At the time the bond is issued, the so-called trigger solution of the Deutsche Bundesbank is used, while interest and repayments will be processed via the Eurosystem’s new Pontes infrastructure. The trigger solution was mainly used during the ECB’s exploration phase in 2024, including for the second KfW crypto security. Pontes is being launched in the third quarter of 2026 as a scalable, new Eurosystem solution that is intended to make a significant contribution to the stability and performance of digital capital market processes in the euro area.
Involvement of investors and market partners
As was the case with the first DLT-based bond issue in summer 2024, KfW is once again focusing on close dialogue with investors. Therefore, a preparation phase lasting several weeks will precede the issue. The aim is to exchange experiences with institutional investors on digital bond issues and ensure they are familiar with the structure of the transaction at an early stage. As with the previous KfW crypto securities, Union Investment is participating as an anchor investor. The company has extensive experience with digital financial instruments.
“For us as an investor and in the interests of our customers, the perspective of the entire ecosystem is essential – secondary market liquidity in particular plays a crucial role in the scalability of digital financial instruments. The weeks-long preparation phase before the issue is therefore highly valuable. Digitalisation through DLT opens up enormous transformation potential for the financial market. It can make a significant contribution to the token economy, as characterised by the increased use of digital tokens for diverse financial applications,”
states Christoph Hock, Head of Tokenisation and Digital Assets at Union Investment.
The transaction is supported by a banking consortium consisting of Bankhaus Metzler, DekaBank, DZ BANK and LBBW. DZ BANK is also acting as a jointly registered holder of the bond. The initial crypto-securities registrar is the Frankfurt-based fintech firm Cashlink, with DekaBank taking over following the successful transition.
In line with its role as a driving force, KfW plans to share the findings on practical experiences with the market throughout the life cycle of the security.
Source: KfW
