Guggenheim Treasury Securities (GTS), a subsidiary of Guggenheim Capital, announced the issuance of $20 million in digital commercial paper on the Ethereum blockchain. The move marks a significant milestone in the financial industry’s continued adoption of blockchain technology, with Guggenheim Capital managing more than $320 billion in assets. The show was made in partnership with Zeconomy, the developers of AmpFi.Digital, a platform focused on streamlining financial services using blockchain technology. This collaboration aims to address key challenges in decentralized finance (DeFi), such as low credit quality and compliance issues.
Improve credibility with a Moody’s P-1 rating
Digital commercial paper issued by GTS has received a P-1 rating from Moody’s, one of the highest ratings for short-term financial instruments, signifying strong creditworthiness. This high rating not only reinforces the credibility of the show, but also demonstrates the potential of blockchain technology to offer secure and reliable financial instruments. Using Ethereum as a platform for issuing digital commercial paper provides a transparent and decentralized environment that can improve trust in such transactions while addressing some of the concerns often associated with DeFi projects.
Zeconomy, the company behind digital issuance platform AmpFi.Digital, said the issuance is a direct response to several challenges faced by decentralized financial systems, including in the areas of credit quality and regulatory compliance. The company believes that the use of public blockchains such as Ethereum can help solve these problems by creating a more transparent and secure environment for financial transactions. Despite Zeconomy’s claim to be the pioneer of this type of issuance on Ethereum, there are several previous examples of digital commercial paper being issued on public and private blockchains.
Digital Commercial Paper: A Growing Trend in Blockchain
While Zeconomy highlighted the uniqueness of this show, the concept of digital trading paper on blockchain networks is not entirely new. Although most commercial paper issuances have used private blockchains, several financial institutions have begun to explore public blockchain platforms, including Ethereum. For example, Siemens recently issued a small amount of commercial paper on the SWIAT permissioned blockchain, settling the transaction through JPMorgan’s JPM Coin. Similarly, earlier this year, Rabobank completed commercial paper transactions worth €2 billion using Ubermorgen’s blockchain platform, demonstrating the growing interest in blockchain solutions for traditional financial instruments.
Additionally, other large institutions have also turned to public blockchains for such issuance. In January 2024, the Hong Kong branch of GF Securities issued $100 million of commercial paper on the Ethereum blockchain, marking one of the largest transactions of its kind. Obligate, a startup backed by Swiss exchange SIX, is also known for issuing commercial paper using the Polygon blockchain, demonstrating the growing appeal of public blockchains in the financial sector. These examples highlight a broader trend to integrate blockchain into traditional financial markets, as institutions seek to leverage the benefits of decentralized systems while addressing regulatory concerns.
Previous initiatives and the road ahead
Europe has also seen its share of blockchain-based commercial paper initiatives. In 2019, Orange and Citi launched a blockchain-based central securities depository (CSD), known as ID2S, intended to issue commercial paper. Project participants included major financial institutions such as CACEIS Bank, Crédit Agricole CIB, Orange Bank and Natixis. However, despite initial enthusiasm, ID2S was closed two years later, reflecting some of the challenges of scaling such initiatives.
Guggenheim Treasury Securities’ decision to issue digital commercial paper on Ethereum marks a significant development in the financial industry’s relationship with blockchain technology. By partnering with Zeconomy, GTS has taken an important step toward addressing long-standing credit quality and compliance issues that have hindered the adoption of decentralized finance. As the DeFi space continues to mature, this show could encourage other large financial institutions to explore blockchain-based solutions for traditional financial instruments.
Paving the way for future blockchain financing
In conclusion, Guggenheim Treasury Securities’ $20 million digital commercial paper offering represents a major milestone in the convergence of traditional financial technology and blockchain. Using the Ethereum blockchain, GTS and Zeconomy demonstrate the potential of decentralized platforms to improve the efficiency, security and transparency of financial transactions. As demand for blockchain-based financial instruments increases, this issuance could pave the way for further adoption of public blockchains in the commercial paper market, providing new opportunities for issuers and investors in the ecosystem Challenge.
