Berlin Hyp, a subsidiary of LBBW, is set to issue a €100 million mortgage-backed digital bond on 2 August, using the SWIAT blockchain platform. This issuance will be the first mortgage bond (Pfandbrief) under Germany’s eWPG laws for bearer bonds, also known as “crypto securities”. These regulations eliminate the need for a physical certificate or a central securities depository. Instead, the bonds will be recorded by a crypto securities registrar, which in this instance will be DekaBank.
The use of blockchain technology in bond issuance is seen as a significant advancement due to its efficiency, transparency, and security. Teresa Dreo-Tempsch, a member of Berlin Hyp’s Board of Management responsible for Capital Market Business, commented on the development: “Blockchains will become increasingly important for issuing bonds and managing all relevant processes throughout a bond’s entire life cycle. We aim to support this development by issuing our first Blockchain Pfandbrief and sharing our experiences with the capital markets.”
DekaBank and LBBW are the lead managers for the issuance and are both investors in the SWIAT platform, a permissioned blockchain network established by DekaBank. Metzler Bank is a key anchor investor in the Berlin Hyp bond.
DLT trials
This move follows a series of digital bond issuances inspired by the Eurosystem’s wholesale DLT trials using central bank money for settlement. The SWIAT platform has leveraged the European Central Bank’s trials, marking at least the third such issuance within a week. These issuances have utilised the Deutsche Bundesbank’s Trigger solution, which ensures interoperability between SWIAT’s blockchain and the Trigger chain, ultimately facilitating payment on the TARGET2 settlement system.
The Eurosystem trials also explored other central bank money settlement options, including the Banque de France’s central bank digital currency (CBDC) and the Bank of Italy’s TIPS Hashlink solution. A total of 48 institutions are participating in the second wave of these settlement trials.
