Photo credit: CDP

Italy’s Cassa Depositi e Prestiti SpA (CDP), the state-owned development bank, and Intesa Sanpaolo, the country’s largest bank by total assets, have issued a 25 million euro ($27.19 million) digital bond using blockchain technology.

The four-month bond, with a fixed annual interest rate of 3.633%, was issued on Ethereum scaling network Polygon and purchased solely by Intesa Sanpaolo, according to a July 18 announcement.

The transaction’s cash flow also leveraged the Bank of Italy’s “TIPS Hash Link” tool, which allows interoperability between blockchain and traditional payment systems.

This bond issuance was the first under Italy’s "FinTech" decree law, which regulates the creation and use of digital versions of specific financial instruments.

Fabio Massoli, CDP’s Director of Administration, Finance, Control and Sustainability, hailed the bond issuance as a “significant step” in capital market innovation. He highlighted the project’s aim to pioneer a new technological model for digital bonds under the new regulatory framework, ultimately benefiting issuers, investors, and potentially even smaller businesses.

The transaction was also part of the European Central Bank’s (ECB) trial to explore how blockchain technology can streamline central bank settlements for transactions on distributed ledger technology (DLT).

“This transaction demonstrates how public blockchains are a powerful technology for financial institutions, making transactions faster and safer,” Niccolò Bardoscia, head of digital assets trading and investments at Intesa Sanpaolo, said in a LinkedIn post.

“Tokenization is establishing a new standard for efficiency and automation in financial markets, and I believe this technological change will impact not only bonds but every asset class over the coming years.”

Tokenization, particularly of real-world assets (RWAs) on-chain, has drawn interest from both the crypto industry and traditional finance sectors. By 2030, the tokenized asset market could reach a value between $4 trillion and $16 trillion, according to optimistic projections by McKinsey and the Boston Consulting Group, respectively.

21Shares’s data on Dune Analytics reveals that over $89 billion worth of assets have been tokenized on the blockchain.

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