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Deal 5: Erste Group's Managing Director Kathrin Gfall-Gapp on First Blockchain Loan Issuance

Deal 5: Erste Group's Managing Director Kathrin Gfall-Gapp on First Blockchain Loan Issuance

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On October 31, 2018, CEE Legal Matters reported that the Erste Group had issued the first loan via blockchain platform in Europe. We reached out to Erste Group's Managing Director and Head of Group Transaction Documentation Kathrin Gfall-Gapp to enquire on the first paperless issuance experience.

CEELM: What does a blockchain issuance look like? How does it work, exactly?

K.G: We established a platform based on blockchain technology. The entire issuance and documentation process of the Schuldscheindarlehen (SSD) issuance was based on this technology, without the need to implement any parallel paper process. With our solution, the issuer provides the SSD offer on the platform, where investors can easily subscribe to it. The SSD agreement is concluded on the platform, which uses a web-based interface and applies a four-eyes principle.

CEELM: Wolf Theiss commented that “the key element was to ensure legal certainty and carefully map the blockchain-based processes.” That must be especially difficult in such a new area. How did you approach those elements of the process, doing them for the first time, without much in the way of previous examples to rely on?

K.G: We looked at two major legal areas, namely civil law and regulation, and asked ourselves some very basic questions: How can one conclude a SSD? What regulation is applicable? 

The next step involved examining how the current issuance process functions and what the involved documentation currently looks like. Then we needed to assess what and how these requirements could be translated in the new purely digital world. By carefully answering those questions and developing robust legal opinions for them, we were able to create the basis on which solutions could also be found for all secondary questions.

CEELM: Why did you decide to make the issuance via blockchain? 

K.G: In our assessment, blockchain technology provided for the certainty and security we deemed necessary. We assessed various digital options before coming to this conclusion.

CEELM: How did you select external counsel for this particular issuance, and why did you select Wolf Theiss? 

K.G: We were looking for a solution-oriented, open-minded legal sparring partner who is very familiar with capital markets law and requirements. We have a long-standing relationship to Claus Schneider at Wolf Theiss due to his being our issuer counsel on all of our issuance programs. Based on this relationship, we knew that Claus would be willing and able to explore this interesting new path along with us. At the same time, we knew that we could be certain that what we delivered together would be a 100% robust legal framework.

CEELM: What are the lessons you learned from the issuance? Would you anything differently next time?

K.G: Our most important take-away: It works! Based on a solid legal framework, we — together with our developers — delivered a client-focused solution that was exactly what we had desired at the very beginning of our brainstorming. It pays off to venture into new territory if you have the right team, a promising idea, and a vision of how to accomplish it.

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