Major Italian Bank Uses Polygon for Digital Bond Trials

Using Ethereum’s layer-2 solution, Polygon, Italy’s state-owned bank Cassa Depositi e Prestiti SpA has effectively completed a $27.2 million digital bond issuing. Part of a trial started by the European Central Bank to investigate fresh ideas for central bank money settlement of wholesale transactions conducted on blockchains, this major transaction required the cooperation of the trillion-dollar investment bank Intesa Sanpaolo. Intesa Sanpaolo broke the news in a July 18 statement.

As reported earlier, Polygon announced a major transition in its token ecosystem, set to take place on September 4.

Italian Bank Teams Up with Polygon

Since Italy passed its FinTech decree law, which controls the distribution and issuing of financial instruments in digital form, this issuing marks the first of its sort. Valued at 25 million euros, the bond has a fixed yearly coupon rate of 3.63% and matures over four months ending on November 18, 2024. This trial had only one institutional investor: Intesa Sanpaolo.

The same day the cash flow was effectively settled utilizing the “TIPS Hash Link” technology of the Bank of Italy, which promotes interoperability between blockchains and conventional payment systems. Head of digital assets trading and investments at Intesa Sanpaolo Niccolò Bardoscia underlined in a LinkedIn post on July 18 the importance of this deal by saying, 

“This transaction shows how public blockchains are a powerful technology for financial institutions, making transactions faster and safer. Over the next few years, this technical shift will affect not only bonds but also every asset class.”

Tokenization Initiatives

This deal has wider ramifications since tokenization has attracted backing from big financial leaders like BlackRock CEO Larry Fink, who sees a time when all equities and bonds run on blockchain rails. 

This perspective is not shared, though, everywhere. Citing inefficiencies and capacity issues, financial law expert Hilary Allen recently advised the United States Congress that public blockchains are too “fragile” for the tokenizing of billions in real-world assets.

Polygon Popularity on the Rise

Though opinions vary, the tokenized asset market has great room for expansion. While McKinsey projects a more cautious $2 trillion during the same period, Boston Consulting Group estimates the industry may reach $16 trillion by 2030. As 21Shares on Dune Analytics notes, approximately $89 billion of tokenized assets are already on blockchain rails right now.

At $40.3 million Polygon is fourth in tokenized value among blockchains, behind Ethereum, Stellar, and Mantle. This successful release by Cassa Depositi e Prestiti SpA highlights the growing acceptability and possibilities of blockchain technology in the financial industry, therefore opening the path for further developments and more broad acceptance in the years to come.