Banco Santander has issued a $20 million bond that will run its course entirely on an Ethereum blockchain, an innovation that the bank bills as a first step towards a potential secondary market for mainstream security tokens in the future.
Banco Santander is itself the issuer of the $20 million bond, while one of the Group’s units purchased the bond at market price. The bond carries a quarterly coupon of 1,98%.
The Spanish bank used the public Ethereum blockchain, tokenizing the bond securely and registering it in a permissioned manner on the blockchain.
Santander Securities Services is acting as tokenization agent and custodian of the cryptographic keys.
The cash used to complete the investment (on-chain delivery-versus-payment) and the quarterly coupons have also been tokenized and therefore represented digitally on the blockchain.
The project was implemented with the aid of London based startup Nivaura, the beneficiary of an investment from Santander's $200 million venture capital fund in February last year. The three-year old firm is targeting the fragmented and manual processes involved in the issuance and administration of debt, equity and structured products.
José García Cantera, chief financial officer at Banco Santander, says the one-year maturity bond has reduced the number of intermediaries required in the process, making the transaction faster, more efficient and simpler.
"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,” he says.