John Whelan, head of digital investment banking at Banco Santander, one of the world’s largest financial institutions, confirms that the bank has carried out an early redemption of its Ethereum blockchain-enabled bond that was issued in September of this year.
Says Whelan,
“This unequivocally proves that a debt security can be managed through its full lifecycle on a blockchain (public in this case).”
On September 12, Santander confirmed the issuance of a $20-million bond directly onto the Ethereum blockchain. According to the bank, it became the world’s first bond to be managed completely on a distributed ledger technology platform.
Santander used ERC-20 compliant tokens to represent the bond, which was then settled with another type of Ethereum-based token kept in a separate account. Santander reportedly held the cryptographic keys throughout the transaction.
Following the confirmation of the purchase order, the funds were sent to the buyer via the Ethereum network. The buyer, one of Santander’s subsidiaries, acquired the bond at market rates.
Says Santander,
“The $20 million bond opens the door to new disruptive technology that can make issuing bonds faster, more efficient and simpler.”
According to ConsenSys, a global blockchain company developing enterprise applications on Ethereum, the technology enhances security, transparency, trust, and programmability compared to traditional processes.
“The Ethereum blockchain enables more open, inclusive, and secure business networks, shared operating models, more efficient processes, reduced costs, and new products and services in banking and finance. It enables digital securities to be issued within shorter periods of time, at lower unit costs, with greater levels of customization.”
Ethereum continues to power a number of new applications in traditional finance as well as decentralized applications that are generating a revolutionary open financial system.