State-Owned Italian Bank CDP Issues Digital Bond on Polygon Blockchain

Cassa Depositi e Prestiti SpA (CDP), an Italian state-owned bank, and Intesa Sanpaolo, Italy’s largest banking group, have completed first digital bond issuance on blockchain. The issuance of the security was carried out via Polygon (MATIC) blockchain.

The €25 million digital bond, has a duration of 4 months and a fixed coupon at annual maturity of 3.633%.

Per an official statement, the issuance comes as a part of a broader European Central Bank (ECB) trial. The ECB set up an initiative to trial ways for wholesale fiat money settlement on blockchains.

Further, the payment was made in central bank money using the Bank of Italy’s TIPS Hash Link solution. It offers connectivity between blockchains and traditional payment systems.

“This transaction represents a significant step for CDP in capital market innovation through the pioneering adoption of blockchain technology for bond issues,” said Fabio Massoli, CDP’s director of admin and finance.

The project will establish a new technological model for digital bond issuance, sticking to the new legal and regulatory framework.

Tokenizing Traditional Financial Instruments like Bonds, Credit and Funds

Global financial institutions and asset managers are increasingly looking to tokenize traditional financial instruments like bonds. This is mainly because, the approach aims to acquire operational benefits such as low-cost, faster and transparent transaction settlements.

World’s largest asset manager BlackRock, for instance, began asset tokenization with launch of digital liquidity fund, in March.

Niccolò Bardoscia, head of digital assets trading and investments at Intesa Sanpaolo believes that public blockchains are a “powerful technology” for banks to make transactions faster and safer.

“Tokenization is establishing a new standard for efficiency and automation in financial markets,” Bardoscia said.

“I believe this technological change will impact not only bonds but every asset class over the coming years.”