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How blockchain is revolutionising capital market transactions

Improving efficiency and transparency

In 2018, Erste Group Bank AG carried out the first fully digital, paperless issue of a borrower’s loan note (Schuldscheindarlehen) via a blockchain platform in Europe. Wolf Theiss provided legal advice to Erste Group on this pioneering transaction.

Since then, a number of such transactions have been carried out on “Dealfabrix”, Erste Group’s blockchain-based debt issuance platform.

Syndicated loans have been added as a new product class on Dealfabrix and, very recently, bonds as well. In late May 2021, Erste Group used the platform to issue a 10 million euro senior prefered “Sustainability Bond” with a tenor of three years, which was fully subscribed by Hypo Vorarlberg. All of the steps involved in the issuance, as well as the documentation for the bond were processed on Dealfabrix within just six seconds, according to a statement from Erste Group.

Kathrin Gfall-Gapp, Head of Group Long Term Funding & Execution at Erste Group, highlighted the importance of blockchain-based issuances for the capital market and why the recent bond transaction was so signficant for Erste:

“Blockchain helps us to facilitate our ambition in driving innovation further in the capital markets, to raise the
efficiency for issuers and investors, and to improve the transparency in transactions.”

Kathrin Gfall-Gapp (Erste Group)

Wolf Theiss Partners Claus Schneider and Matthias Schimka provided legal support to Erste Group’s transaction documentation team from the beginning. The key element was to ensure legal certainty and carefully map the
blockchain-based processes that were used for the first time in Europe for such kind of transaction.

“This issue marks another important step in the digitalisation of capital market transactions. This issuance was a transaction under productive conditions”, Claus Schneider explained. “The traditional issuance process is both complex
and time-consuming. Thanks to digitisation, these processes are now a lot faster and offer transaction speed and scalability for all parties involved”. With the platform developed by Erste Group, an issue can be carried out within a
short period of time without using paper documents.

“This pioneering transaction marks the beginning of a new era of practical applications for issues on the capital market. Legal advice in the field of digital applications requires both legal and technical expertise, as the processes are strongly technically driven and therefore the legal solutions must adapt to them.”

Claus Schneider (Partner, Wolf Theiss)