Bitbond, a German fintech company that issued the first approved tokenized bond, has partnered with Bankhaus von der Heydt, one of world’s oldest banks. Bitbond will help the bank provide digital asset structuring and servicing using blockchain technology. Digital Asset Live Editor-in-Chief talked to Philipp Doppelhammer, Bankhaus von der Heydt COO, and to Radoslav Albrecht, Bitbond CEO and Founder.
Q1: How was it for a banking house, founded in 1754, to cooperate with a digital assets company?
A1: We began in 2018 with transforming the bank from a pure asset and wealth manager to a more B2B oriented institute, servicing institutional investors with tailor made investment products such as securitisation vehicles, investment funds and banking solutions like loan origination, trustee functions etc.
As we may be one of the oldest banks in Europe, we are for sure one of the smallest. And history alone doesn’t bring you new business opportunities. Therefore, an essential part of our strategy has been digitalisation and process automation from day one.
We believe that our size gives us a strategic advantage when it comes to implementing new systems or partnering with IT companies, Fintechs and Startups, as we are able to move very fast and implement new technology in an agile way.
Consequently, it felt quite natural for us to partner with a digital asset company like Bitbond. A true innovator, that has already issued a regulatory compliant tokenized Security (BB1 Token) in Germany.
Q2: Bankhaus von der Heydt intends to issue tokenized securities. Please elaborate on these plans. Will it be securities for clients of the bank or the bank’s own assets?
A2: As of now, we plan to use tokenized securities in order to substitute our already existing white label securitisation business.
Tokenization will help us to issue securities for our own assets as well as for our clients in a much more efficient and transparent way, as opposed to the process one needs to go through today.
At this stage we do not intend to make those products accessible to the public.
Q3: Also, the bank plans to issue own stablecoin pegged to Euro. How will this stablecoin be used?
A3: It will be an integral part of our end-to-end security issuance system, allowing investors to conveniently send over fiat money, like they are used to.
Our goal is to smooth the transitioning phase for investors from old-fashioned investment products and processes to a new digital way. With our banking licence we are perfectly able to do that.
Q4: Bankhaus von der Heydt intends to provide custodial services for digital assets. Given the legal novelties in Germany, it is the most interesting area. Please tell us about these plans.
A4: Next to the tokenized securitisation use case we will offer custody services as a trusted partner to B2B clients in an environment that is designed to function without trusted entities.
We are currently talking to many platform providers e.g. lending platforms, that are now in the process of issuing security tokens and are looking for an established partner that helps to bring on regulatory and process knowledge.
Without a partner that is regulated to the highest level, it will be difficult to meet the requirements of institutional clients.
What we see is a growing demand for parties that bring the technology on the one hand and the regulatory knowledge on the other hand. With the help of Bitbond we are able to combine the best of both worlds with our new solutions.
Q5: Bitbond has been developing blockchain-based financial services since 2013, you were also the first in Germany to recieve approval by the national financial regulator to issue a tokenized bond. How did the German landscape of digital assets evolve since 2013, in your view?
A5: In 2013 all of the activity in digital assets was focused around native cryptocurrencies. Tokenization didn’t really exist, yet.
On the Bitbond platform we utilized cryptocurrencies for efficient cross-border payment processing and were one of the first German companies together with Bitcoin.de and Bitwala (and its predecessor companies) to be operating in the digital asset space.
When the idea of Ethereum was released in 2014 people started to talk about tokenization but first projects were rare. In 2016 the ICO wave started and peaked in late 2017 / early 2018. Only few of the ICOs came out of Germany. Therefore activity in Germany was still relatively limited.
2019 was a pivotal year for the German digital asset space. In January 2019 BaFin approved the Bitbond tokenized bond, two further prospectus applications were approved just a few months later and in September the German government released its blockchain strategy. This has drawn attention to the subject of digital assets also with more established companies and banks.
At the end of 2019 the change of the German Banking Act which now regulates digital asset custody services was the ultimate step to significantly foster market activity in the space.
Today Germany is very well positioned to play a significant role in the digital asset sector in the coming years.
Q6: What are the main lessons to draw from this development?
A6: Parts of the development that happened recently was foreseeably already in 2014 but everything seemed very far away. It wasn’t at all clear which role Germany would play for digital assets.
Today we see that the combination of private sector activity, regulatory support and changes in legislation are all necessary components to spark a significant market adoption.
If Germany wants to stay on top of the development, further adjustments in legislation and investments by banks and fintech companies will be required. The starting position is very favorable.
Q7: What shall we expect to see in the ecosystem of German digital assets in 2020 and beyond?
From our point of view the German market is predestined to digital assets in the next years related to the fact that the German regulatory framework allows investors to make safe investments in digital assets.
Furthermore the German financial market is one of the most interesting markets for institutional investors, for example the Real Estate sector.
Institutional investors are often interested in an efficient, transparent and safe process. Exactly this is the case for digitals assets. Tokenized securities absolutely fulfill these claims. Therefore it is only a matter of time before the market recognizes this added value.
We will see the bigger players entering the market sooner or later which will help to build standards as well as cross-platform solutions. Investors will follow accordingly and the market will be become more efficient and transparent.