Last week, Banco Santander, S.A. (d/b/a Santander Group) revealed that the multinational bank has initiated a complete end-to-end blockchain bond, issuing and settling the bond using public blockchain technology. One of the first of its kind, Santander claims that the successful end-to-end blockchain bond may result in a faster, simpler, and more effective process by which to issue bonds.
“Santander is at the forefront of the profound digital transformation of the financial sector and this transaction is one example,” Banco Santander CFO José García Cantera stated in the announcement, “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.”
Announced in a September 12 press release, the bank claims that the transaction is a first for traditional finance systems, as the statement explains Santander’s utilization of the Ethereum blockchain in the tokenization of both the $20 million bond’s quarterly coupon and the cash used to complete the investment. The transaction was run entirely within the company and its subsidiaries with Santander Securities Services serving as the designated tokenization agent and cryptographic key custodian, while Santander Corporate and Investment Banking (“Santander CIB”) assisted in the bond’s issuance as the dealer.1 Mentioning that work on a blockchain project began in 2016, the release states that the transaction is a fairly standard bond, carrying a quarterly coupon of 1.98% and a one-year maturity.
The fact that both the issuance and settlement occur entirely on-chain, and that the number of intermediaries involved was significantly reduced through automation, Santander’s application of blockchain technology to fixed income instruments is an unignorable improvement to existing financial systems. Speaking to CoinDesk, Santander’s head of digital investment banking John Whelan noted that cryptocurrency is not a primary focus of the company’s interest in blockchain, but that it is technically possible. “At the bank, we are not interested in cryptocurrencies directly. The technology is the same underneath, but we are interested and our customers are interested in traditional dollars, euros, pounds and that’s our space.”2
Looking to the future, the company notes the hope to further improve the endeavor for clients, stating, “[t]he goal for Santander CIB is to engage with our most innovative clients as we move from the project stage to product development.”
- Allison, Ian. “Santander Settles Both Sides of a $20 Million Bond Trade on Ethereum.” CoinDesk. CoinDesk Inc, September 12, 2019. https://www.coindesk.com/santander-settles-both-sides-of-a-20-million-bond-trade-on-ethereum
- Allison, Ian. “Santander Settles Both Sides of a $20 Million Bond Trade on Ethereum.”