KfW to Issue First Blockchain-Based Digital Bond as Crypto Security in 2024

KfW, Germany’s largest promotional bank, is set to issue its first blockchain-based digital bond in the form of a crypto security in accordance with the German Electronic Securities Act. This move comes as part of KfW’s efforts to contribute to the development of the market for digital securities in Germany and Europe.

The transaction, scheduled to be completed in summer 2024, marks a significant step towards the digitalisation of the financial industry, which is seen as crucial for the competitiveness of the European financial market. KfW has already gained experience with digitalisation in its money market and derivatives activities, and now aims to attract market participants with this innovative approach.

“We are 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. The issuance of the blockchain-based bond is expected to streamline capital market processes, making transactions more secure and capital flows faster.

To ensure investor engagement, KfW will engage in a dialogue with European institutional investors during a preparatory phase. Union Investment has already been secured as an anchor investor, bringing extensive experience with crypto securities to the table. The transaction will be carried out by a bookrunner consortium consisting of DZ Bank, Deutsche Bank, LBBW, and Bankhaus Metzler.

Overall, KfW’s move towards digitalisation in the financial industry is seen as a positive step towards increased efficiency and scalability. The combination of technological progress and a regulated environment provides a solid foundation for future digital transactions. Frankfurt-based fintech Cashlink Technologies GmbH will act as the crypto securities registrar for this groundbreaking transaction.

In this digital bond issuance, KfW will limit itself to the issuance of the bond in a digital format, while payments will continue to be processed using traditional payment systems. The aim is to streamline capital market processes for the benefit of the real economy and to link European capital markets more closely together.