On February 9, Santander and NatWest announced completion of a pilot issue of a plain-vanilla, fixed-rate sterling bond tokenized on Ethereum, the most prominent blockchain for securities as programmable smart contracts and for decentralized finance (DeFi).
NatWest was the issuer and dealer with Santander – a regular participant in pilot new issues on blockchain – the investor.
This was a so-called cross-chain transaction, a breakthrough with payment away from Ethereum on a second network, a test version of the Fnality Payment System (FnPS).
Fnality is on course to launch its first FnPS into live production in October 2022, enabled by the Bank of England’s new omnibus account. It should allow near instant payment in securities markets, which in this case, enabled same-day settlement of the bond.
Today, secondary bond markets settle two days after trade date (T+2), while primary markets can have even longer gaps between investors confirming orders and then paying for and receiving bonds.
“Launching a new systemically important payment system is not a straightforward task,” Rhomaios Ram, chief executive of Fnality, tells Euromoney.
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