The financial sector around the world is currently exploring blockchain technology that records permanent transaction records and reduces dependencies on centralized and easily hackable Web2 servers. Germany's third largest state-owned bank, Kreditanstalt fuer Wiederaufbau (KfW), has decided to join the global list of lenders experimenting with blockchain. In the coming days, KfW has planned to launch its first blockchain-based digital link. In this way, you will not only commit to the blockchain itself, but also participate in the adoption of its technology.
The first tokenized bond that KfW is preparing to issue is being characterized by the bank as a “cryptographic security.”
“With the planned issuance of our first crypto security under the German Electronic Securities Act, we are once again testing an innovation in the financial market and want to pave the way for future such transactions for other market participants “, Melanie Kehr. , said a member of the executive board of the KfW group in an official blog post.
In finance, a bond is a debt obligation in which one party lends money to another party in exchange for interest payments and the return of principal when the bond matures. To represent a link essentially means that a virtual representation of that link is recorded on a blockchain to validate its transaction history and ownership.
When a bond is represented, it brings a host of benefits, including automating various aspects of bond management. These aspects include interest payments and maturity settlements. In addition, link tokenization reduces the requirement for middlemen or intermediaries at each step, leading to a significant drop in the cost of managing the overall process.
“Now we are taking the next big step with the issuance of a blockchain-based bond for which we want to attract as many investors as possible. The initial goal is to learn and therefore identify potential for improvement. We believe that digitization will be advantageous in terms of greater efficiency and scalability,” said Tim Armbruster, KfW's treasurer, commenting on the development.
In the near future, KfW will hold dialogues with institutional investors based in Europe. This process is expected to last for weeks and aims to understand what investors want and make them understand the different ways blockchain can be leveraged for a fintech revamp. Frankfurt-based fintech Cashlink Technologies GmbH will act as KfW's crypto securities registrar.
This is the first major bank in Germany that has decided to take a pro-Web3 step. Before that, Germany's Lufthansa Airlines and the BND intelligence unit have made pro-Web3 decisions.
