The Eurosystem’s wholesale DLT trials using central bank money for settlement have inspired a raft of institutions to issue digital bonds. The latest is Berlin Hyp, an LBBW subsidiary, which plans to issue a €100m mortgage backed digital bond on the SWIAT blockchain on August 2.
This will be the first mortgage bond (Pfandbrief) to use Germany’s eWPG laws for bearer bonds or ‘crypto securities’. This means that there’s no legal requirement for a physical certificate or the involvement of a central securities depository. Instead, the bonds must be logged by a crypto securities registrar, in this case the registrar will be DekaBank.
“Given the high degree of efficiency, transparency and security they offer, blockchains will become increasingly important over the medium term as a technology for issuing bonds and managing all relevant processes throughout a bond’s entire life cycle,” said Teresa Dreo-Tempsch, member of the Board of Management of Berlin Hyp with responsibility for Capital Market Business. “We want to support this development by issuing our first Blockchain Pfandbrief, and we also plan to share with the capital markets the knowledge we gain from our experience here.”
DekaBank’s SWIAT DLT
DekaBank and LBBW are the lead managers for the issuance. They are both investors in the SWIAT platform, a permissioned blockchain network founded by DekaBank. Metzler Bank is a key anchor investor in the Berlin Hyp bond.
SWIAT has taken full advantage of the ECB trials. We believe this is at least the third issuance announced in a week. All have used the Deutsche Bundesbank’s Trigger solution. The Trigger solution provides interoperability between SWIAT’s blockchain and the Trigger chain. The Trigger chain then executes a payment on the TARGET2 settlement system in the conventional way.
Other central bank money settlement options for the Eurosystem trials included the Banque de France’s central bank digital currency (CBDC) and the Bank of Italy’s TIPS Hashlink solution. Forty eight institutions are taking part in the second wave of settlement trials.