As reported by CoinDesk, the Spanish major bank Santander has revealed that it has explored the opportunities offered by Ethereum blockchain on a full scale – the bank has issued tokens for a $20-mln bond and used other ERC-20 tokens that represented cash stored in a custody account to settle it. No outside investors were involved.
A deal closed via blockchain on both sides for the first time
These days, blockchain is becoming so popular that even major banks are starting to use it for putting their deals on the digital track. However, if banks issue bonds on an open or even private ledger, they then settle them with via the traditional system of payments.
Santander has outperformed them all this time by closing the deal via blockchain on both sides.
Earlier this year, the World Bank and the French-based Societe Generale emitted a bond via Ethereum too but nothing was said about settling it via a blockchain.
Santander reps claim that every single process in that deal was done via Ethereum. They even used the Santander Security Services custody for the cryptographic keys which were used for issuing the tokenized bond and the tokenized cash used for settling it.
The bank issued a bond to itself without getting any outside investors involved.
Details of the deal
The head of digital investment banking section at Santander, John Whelan, stated:
For Santander, this is really much more of a technology innovation issue than a pure financial issue. We regard this an important first step that will be followed by more complex transactions.”
The bond they used was a plain-vanilla one. It had a maturity for one year, four quarterly coupons and a 1.98-percent rate.
The tokenized cash and bonds were exchanged “simultaneously and irrevocably.” The cash had been kept in escrow on Ethereum using a smart contract which allowed the deal to happen once the issuer underwrote the transaction.
When asked whether the bank could technically perform the same using Bitcoin or Ether, Whelan said that it is possible but the bank does not plan to do that so far.