Santander Settled Mini-Bond of $20 Million on The Ethereum Platform
For the first time, the Spanish banking giant, Santander digitized the process of issuing bonds on a public blockchain and settled a mini-bond of $20 million on the Ethereum blockchain platform. Santander Corporate and Investment Banking (CIB), the bank’s global arm that maintains corporate and institutional clients, acted as the dealer for the issuance.
Describing the venture as a “real-money pilot,” Antonio Torío, head of funding at Santander stated:
“For Santander, that is far more of a know-how innovation concern than a pure monetary concern. We regard this as an essential first step that can be adopted by extra advanced transactions.”
Banco Santander claimed to have transformed into the primary establishment to use a public blockchain to control all the processes involved in the issuance of a bond. They also announced that the one-year bond offers a 4 quarterly coupon of 1.98%, and Santander Securities Services will continue to serve as the ‘tokenization agent’ and keeper of the cryptographic keys for tokenized bond and tokenized cash, until maturity.
The bank reported that:
“The cash used to complete the investment (on-chain delivery-versus-payment) and the quarterly coupons have also been tokenized, i.e., represented digitally on the blockchain.”
In the mini-deal, an Ethereum token was used to represent a $20 million bond while another set of ERC-20 tokens, which represented money held in a custody account, were used to settle the same bond.
The automation of end-to-end process has helped the bank reduce the number of intermediaries needed in the process, hence making the transaction “faster, more efficient and simpler.”
“It’s an evolutionary step. There are no secondary markets yet, but we are on that path.” : John Whelan, the head of digital investment banking at Santander, commented. Previously they had issued similar bonds via the blockchain technology but only on a private Ethereum platform.
José García Cantera, the chief financial officer at Banco Santander, stated: “Santander is at the forefront of the profound digital transformation of the financial sector and this transaction is one example. We want to take advantage of any technology that can accelerate that process so that our customers thrive and be faster and more efficient, and blockchain is one of those technologies.”
And the global head of Santander Corporate & Investment Banking, José María Linares explained:
“Our clients are increasingly demanding the best thinking and technology in how we serve them in their capital-raising efforts. This blockchain-issued bond puts Santander at the forefront of capital markets innovation and demonstrates to clients that we are the best partner to support them on their digital journey.”
Santander received technical support from the London-based fintech startup, Nivaura, while law firm Allen & Overy provided legal advice. Santander, having invested in the startup Nivaura via its venture arm, Santander InnoVentures, also has a stake in it.