Premiere: DZ BANK and KfW fully map the lifecycle of a crypto security on a public blockchain
DZ BANK (as issuer) and KfW (as investor) have for the first time carried out the issuance of a crypto security pursuant to the German Electronic Securities Act (“eWpG”) based on a so-called Smart Bond Contract. With this transaction, both banks have, for the first time, mapped the entire lifecycle of a digital bond issuance via blockchain infrastructure – from the initial expression of a liquidity need, through the creation of the digital security, to payment settlement. This transaction thus makes a significant contribution to the further development and standardisation of digitally issued securities.
Smart Bond Contracts (“SBCs”) are algorithms that coordinate the interaction of all involved parties according to clearly defined conditions and autonomously and standardly control the processes throughout the entire lifecycle of a digital security. For example, they initiate payments as soon as corresponding conditions are met. SBCs are based on Distributed Ledger Technology (“DLT”), which provides participants with common, reliable, and tamper-proof transaction conditions, thereby ensuring transparent and secure execution.
“This transaction marks a genuine innovation in the financial market,” said Matthias Bergner, Head of Treasury at DZ BANK. “Together with our offerings in the field of digital assets, it underscores our leading role in the German banking sector within the entire digital securities universe.”
The digitalisation of the financial market is a strategic concern for KfW, to which it is strongly committed. In this context, it has already been active several times both as an issuer of crypto bonds and as an investor in various digital bonds. KfW thus acts as an innovation-driven pioneer that shares its extensive experience with market participants and enjoys high trust in testing new digitalisation measures.
“We were pleased to participate in this project, as this transaction represents another milestone on our learning journey towards Europe’s digital sovereignty,” explained KfW Treasurer, Tim Armbruster. “To keep the German and European financial markets competitive, we need scalable digital products, and as a promotional bank, we are happy to contribute to their development and testing.”
Advantages of SBCs: Fast, transparent, and secure
Traditionally, bond issuances require central securities depositories and other service providers to manage essential transaction steps, execute bookings, and coordinate settlement.
In the current transaction, DZ BANK and KfW have successfully conducted the entire issuance process via DLT for the first time, thus eliminating the need for a central securities depository. Required service providers (e.g., the crypto security registrar) supply their data via the DLT infrastructure, where relevant information is structured, integrated, and made available to all transaction participants. The blockchain thus serves as the central communication channel for the transaction. Once recorded, transaction information can no longer be retroactively altered or deleted, ensuring a high level of tamper resistance. All contractual terms are therefore transparent and immutable for all involved parties. Furthermore, the speed of the issuance process is significantly increased. While a traditional bond issuance typically takes five days, the pilot transaction using the SBC concept took about one hour. This simultaneously reduces process costs and leads to greater efficiency for all contracting parties.
Within the pilot transaction on the public Polygon blockchain, WM Datenservice was responsible for the automated ISIN assignment, and Cashlink GmbH handled the digital registry. The automated settlement was conducted via the Deutsche Bundesbank’s trigger solution, which served as an interface between the blockchain and central bank balances.
Transaction underscores pioneering role in digital securities
The transaction marks the next milestone in DZ BANK’s commitment to developing digital standards for a fully digital lifecycle of securities. Already since 2021, it has been working on developing automated, DLT-based processes for OTC derivatives through Smart Derivative Contracts. Just recently, in December 2025, it internationally traded an OTC derivative in the form of a Smart Derivative Contract. With the SBC pilot transaction, DZ BANK has now extended this approach to the securities business.
DZ BANK AG is the central institution in the cooperative financial network and serves all German cooperative banks, by which it is majority owned. As “DZ BANK. Die Initiativbank”, it is also active as a corporate bank and acts as the holding company for the specialised service providers in the DZ BANK Group. With its extensive financial products and services, the DZ BANK Group supports the local cooperative in Retail Banking, Corporate Banking, Capital Markets, and Transaction Banking.
KfW is one of the world’s leading promotional banks. With its decades of experience, KfW is committed to improving economic, social and environmental living conditions across the globe on behalf of the Federal Republic of Germany and the federal states. To do this, it provided funds totalling EUR 98 billion in 2025 alone. KfW does not have any branches and does not hold customer deposits. It refinances its promotional business almost entirely through the international capital markets. In 2025, KfW raised EUR 71 billion in the capital markets to fund its business activities.
