€60M Digital Bond Issued by Tech-Giant Siemens AG

Self-described as, “a technology company focused on industry, infrastructure, mobility, and healthcare”, Siemens AG is no stranger to nascent industries with an eye on the future.  With that in mind, Siemens has just announced the issuance of its first blockchain based digital bond.

Details of the Bond

A bond is essentially a loan, taken out by a company or government, which is funded by investors looking to generate a modest return.  In this instance, Siemens issued a €60M ($64M USD) bond, which matures in one year.

What makes this issuance particularly interesting, is that it was done through use of a public blockchain.

Benefits to Be Had

By issuing this bond on a public blockchain, Siemens notes that it is able to take advantage of multiple benefits not possible through traditional avenues.  These include,

• removing the need for paper-based global certificates
• removing the need for central clearing
• removing the need for banks/intermediaries in the sales process

Siemens states that with the Electronic Securities Act having come in to effect in 2021, it was able to sell “…securities directly to investors without engaging established central securities depositories”.  It also notes that the entire process took only two days.

Naturally, by removing these various complexities and once-required parties, the entire issuance process not only becomes quicker, but more efficient and cost effective.

Commentary

Upon announcing this bond, Ralf P. Thomas, CFO of Siemens AG, took the time to comment.  He states,

“With our innovative products and technologies, Siemens supports the digital transformation of its customers with great success. It is therefore only logical that we test and utilize the latest digital solutions in finance, too. We are proud to be one of the first German companies to have successfully issued a blockchain-based bond. This makes Siemens a pioneer in the ongoing development of digital solutions for the capital and securities markets,”

Strengthening Trend

The use of blockchain in the issuance of bonds is a trend that we recently highlighted.  This trend towards the issuance of digital bonds, which are a form of digital security or ‘security token', comes as regulators are beginning to crack down on blockchain based assets that look to operate outside of already established regulations.

While digital securities may be built atop the same technology as such assets, the difference is that they are structured with full compliance in mind, making them much more appealing to companies like Siemens.