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Bond Emission – Blockchain could revolutionize bond business News

Sunday, September 3rd, 2017 | Economy

More and more financial institutions and startups are jumping on the trend. The Landesbank Baden-Wuerttemberg (LBBW) and Stuttgart-based automaker Daimler recently placed a private promissory note on the blockchain. The London-based trading platform BlockEx wants to bring the first public bond in Europe on the market this month.
"The topic of blockchain is on the rise," says professor Philipp Sandner from the Frankfurt School of Finance & Management. "More and more banks and companies are working behind the scenes on projects in a wide range of applications." However, the legal and regulatory framework is still lacking. But Sandner is confident that something will happen soon.
The blockchain is a kind of database where transactions such as referrals or documents are stored. It is the backbone of digital currencies such as Bitcoin and was developed nine years ago. Advocates of the technology praise their transparency and security, because the blockchain is stored decentrally on different computers world-wide. In addition, since the information is stored encrypted, manipulations are almost impossible.
Save time and paperwork
In June, LBBW and Daimler pushed ahead with the issuance of a block- The paper, with a maturity of one year and a volume of 100 million euros, was placed entirely over the still quite young technology at three regional Kreissparkassen and the LBBW itself – in addition to the traditional paper path, because the financial supervision BaFin still does not recognize the blockchain process.
However, the blockchain emission has shown many advantages, says a LBBW spokesman. Thus, the carer gets more quickly to his money, the bank has less effort in the documentation and implementation of the bond.
So far, a bond issue lasts about ten weeks, while the bank and companies are sending faxes back and forth. Through the blockchain the paperwork would be dropped, everything would go faster. Loan contracts, ID documents or the verification of payment receipts can be digitized and are open to all parties involved. "The technical development opens up completely new ways of making financial processes simpler and more efficient," emphasizes LBBW CEO Rainer Neske.
However, the development of concrete applications is still at an early stage and is especially puzzling for private individuals. According to a study by the market research institute YouGov, only eleven percent of Germans know what the term "roughly" means. After all, every fifth has ever heard of it. "However, as soon as the technology finds more and more applications and users due to its advantages, a revolution will come into its own", YouGov consultant Markus Braun is sure.
Bond costs are expected to drop by half
The digital trading platform BlockEx is hoping for a breakthrough in mass business. She is about to place the first public blockchain bond. "We want to create a completely new platform for the bond market," says BlockEx manager James Godfrey.
Above all, small and medium-sized enterprises should have the opportunity to tap the bond market at a lower cost. In an issue, corporations for bank and attorney fees are currently looking at hundreds of thousands of dollars on the table, says Godfrey. BlockEx wants to cut costs by 50 to 75 percent.
Many other institutions, such as Deutsche Bank, Commerzbank and Deutsche Börse, also have blockchain projects in the pipeline. "We work a lot in consortia so that the blockchain can also be implemented in the broad range," says Commerzbank manager Michael Spitz. "Over the next five years, technology could be used in many areas of banking, but legal and regulatory frameworks need to be regulated."
Professor Sandner expects BaFin to take appropriate steps in the coming months. Because the US is once again pushed forward: In the state of Delaware, where more companies are registered than residents, a law came into force in July, which allows the trade of shares on a block-chine basis. "This could increase the pressure on other countries to adopt appropriate legislation as well."


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