Santander Bank Sets $20M Bond Trade on Ethereum Blockchain

Using a token on Ethereum to represent the $20 million debt issuance, Santander settled both sides of a bond trade with another set of ERC-20 tokens representing cash held in a custody account.

Santander Bank Sets $20M Bond Trade on Ethereum Blockchain
Santander Bank Sets $20M Bond Trade on Ethereum Blockchain

Spanish banking giant Santander says it has become the first institution to use a public blockchain to manage all aspects of a bond issue. The company not only used a token on ethereum to represent the $20 million debt issuance but settled it with another set of ERC-20 tokens representing cash held in a custody account.

To understand why that’s important, imagine asking someone a question on WhatsApp and waiting for them to mail a postcard with the answer. That’s what it’s like to issue securities on a blockchain while settling the cash side of the trade through the analog legacy system. But Santander, in this analogy, conducted both parts of the conversation digitally.

Previously, the World Bank issued a similar blockchain bond but used a private version of ethereum. French lender Societe Generale issued a bond earlier this year on the public ethereum network but said nothing about cash on-ledger.

Santander is claiming bragging rights since every part of its process is digitized, automated and on-chain, including having Santander Security Services custody the cryptographic keys for the tokenized security and tokenized cash.

Asked if Sandander’s custody services could equally hold fully-fledged digital assets such as bitcoin and ether, Whelan said this was technically possible but not the bank’s plan, adding:

“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.”

However, like SocGen, Santander issued the blockchain bond to itself, meaning no outside investors were involved.

“It’s an evolutionary step,” John Whelan, head of digital investment banking at Santander’s corporate and investment bank, told CoinDesk. “There are no secondary markets yet, but we are on that path,”