Swarm Markets, an open platform for the creation and management of blockchain assets, announced today it will be developing its first digital security in partnership with Volksbank Mittweida, a German-based bank. The first registered bond (Namensschuldverschreibung) will be issued in an aggregate of €1 million on the Polygon chain and sold by Volksbank directly to its retail customers.
Swarm Markets prevailed in a field of competitors responding to an RFP to digitize bonds for one of the world’s most respected cooperative banks, meeting technical and regulatory requirements as well as accommodating Volksbank’s business needs. In this case, aligning with sustainability goals by utilizing Polygon to reduce the asset’s energy burden compared to Ethereum’s proof-of-work (PoW) blockchain.
Bonds will be issued using the SRC20 security token protocol (Swarm Powered Fundraise uses SRC20 to perform regulatory compliant fundraises for security tokens) and administered via the MySwarm App, both originally developed by the Swarm Network DAO, using smart contracts newly adapted by Swarm Markets for the Polygon chain.
The bonds represent an important first use-case demonstrating how Swarm Markets’ license status — operating under the authority of Germany’s Federal Financial Supervisory Authority (BaFin) — provides unique capabilities to eliminate obstacles to DeFi for institutions.
Swarm Markets is leveraging these licenses to create tools that empower traditional financial institutions to operate in digital asset markets and solve real-world problems. Almost all bonds in the traditional finance industry are registered bonds: where the bondholder’s information is kept on record; such as corporate bonds, treasury bonds, or municipal bonds.
This partnership is an opportunity for Volksbank’s investment banking apparatus and its customers to familiarize themselves with financial instruments living on the blockchain. It uses a straightforward asset class and allows users to further explore other functionality that comes embedded with digital assets.
“Both sides view the bond digitization partnership as a jumping-off point from which future opportunities to build new (DeFi) products around new assets will emerge. In just over 6 months since Swarm Markets’ first public announcement, we’ve built out a formidable tech infrastructure for digital assets supported by a world’s-first regulatory framework, which has now borne its first digital asset anchored in a trust structure with a global banking titan. We’re proud to make good on our promises in such a short time and we look forward to seeing where innovations and partnerships like this one take us in the future.”
– The Swarm Team