An inherent feature of blockchain technology is data transparency. Data stored in the network is confirmed (in terms of its integrity, immutability, and timeline), and once recorded in a block, it is available to all network nodes. In this context, it is crucial to understand transparency as an element that enables verification of the ledger's actual state. Data that is not available to all network participants cannot be fully confirmed—thus, consensus among all participants regarding the entry of specific information requires its sharing within the network. Sharing information about an event, in turn, significantly affects its confidentiality.
Translating this to the capital market (or, more broadly, the financial market), a dilemma arises, requiring the need to balance this transparency with the requirements of confidentiality, data protection, and professional secrecy. The collaboration among multiple entities within a single distributed blockchain network means assessing the sensitivity of data stored on the network.
At this stage of the analysis, we are dealing with another "variable." In general, a DLT network need not be public. So-called private networks allow for restricting access to the ledger's state to identified entities. This, in turn, means that not everyone will have access to the data. Therefore, even if transparency elements inform everyone about an event, the information will ultimately remain within a trusted circle of identified entities. This model was implemented in the CSDonDLT project. As a result, access to the network and any data related to OTC transactions is restricted, even though the data itself does not contain sensitive information, including information identifying the parties.
However, to understand the issue of blockchain network transparency, it is worth examining how certain facts can be confirmed with access to the network (in this case, public networks). I will illustrate this using the example of the first Siemens bond issue, which was widely reported in the media several years ago.
The announcement
A few years ago, Siemens, the multinational technology company, made headlines with the announcement of the first digital bond issued on a public blockchain in accordance with Germany’s Electronic Securities Act (eWpG).
Siemens portrays this bond issuance as pioneering in the digital transformation of capital and securities markets. By issuing the bond on a public blockchain, Siemens claims to have reduced the need for paper-based global certificates and for central clearing, a major benefit of the blockchain-based issuance process. In addition, the bond can be sold directly to investors without needing a bank to function as an intermediary, further streamlining the process.
