- Digitalisation is crucial for the competitiveness of the European financial market
- KfW wants to intensify the discussion surrounding crypto securities and attract market participants
KfW is currently preparing to issue its first blockchain-based digital bond in the form of a crypto security in accordance with the German Electronic Securities Act (eWpG). The transaction is scheduled to be completed in summer 2024.
“Digitalisation of the financial industry plays a crucial role in the international competitiveness of the European financial market. As Germany’s largest promotional bank, one of our most important goals is to make an active contribution to the development of the market for digital securities in Germany and Europe. With the planned issue of our first crypto security in accordance with the German Electronic Securities Act, we are once again testing an innovation on the financial market and aim to pave the way for future transactions of this type for other market participants,” explained Melanie Kehr, Member of the Executive Board of KfW Group and responsible for IT, Transaction Management and Operations.
Since 2022, KfW has gained experience with the digitalisation of its money market and derivatives activities and has already issued a first digital bond in the form of a central register security in accordance with the German Electronic Securities Act. “We are now taking the next big step with the issuance of a blockchain-based bond for which we want to attract as many investors as possible,” added Tim Armbruster, Treasurer at KfW. The combination of technological progress and a regulated environment has provided KfW with good conditions for taking this next step. “The initial goal on the road to the digitalisation of refinancing is to learn and thereby identifying potential for improvement. We believe that digitalisation will be advantageous in terms of increased efficiency and scalability,” said Armbruster.
KfW places special emphasis on the importance to investor engagement. For this reason, an exchange of knowledge will take place in dialogue with European institutional investors during a preparatory phase of several weeks. This is to give the investors sufficient time to familiarise themselves in detail with this type of transaction.
KfW has already been able to win Union Investment as an important anchor investor. This company already has extensive experience with crypto securities, which is essential for preparing the transaction.
The transaction will be carried out by a bookrunner consortium consisting of DZ Bank, Deutsche Bank, LBBW and Bankhaus Metzler. These will also be included in the dialogue with investors. In addition, DZ Bank will also acts as a collective registered holder of the bond.
“Digitalisation streamlines capital market processes for the benefit of the real economy; transactions become more secure, capital flows faster. It also links the European capital markets more closely together. As the DZ BANK Group, we are making an important contribution to achieving this with the custodian solution for digital securities,” said Souad Benkredda, Member of the Board of Management of DZ BANK AG.
Frankfurt-based fintech Cashlink Technologies GmbH will act as the crypto securities registrar.
In this transaction, KfW is limiting itself to the issuance of the bond issue in a digital format as such. Payments will continue to be processed in the traditional way using the established payment systems.
Explanatory notes including diagrams on KfW’s previous digitalisation steps can also be found here .
Source: KfW
