The Eastern German state of Saxony-Anhalt is set to become the country's first federal state to issue a digital bond, or crypto-security.
The bond will become available in the coming months and is aimed at institutional investors, the state's Finance Ministry announced in Magdeburg on Thursday.
The final pricing is expected to be determined at the time of issuing.
The technology has so far been adopted mainly by private companies and fintech firms, but now a German state actor is jumping on the bandwagon for the first time.
This gives the entire German digital securities market a boost in terms of trust and credibility.
"We want to seize the opportunities offered by digital technologies at an early stage and gain practical experience with modern issuance and registration processes," said state Finance Minister Michael Richter.
Saxony-Anhalt has a debt mountain of around €24 billion ($28 billion), one of the highest levels of debt per person in Germany.
The crypto-securities replace paper bonds, which are being completely abolished.
According to the European Investment Bank (EIB), selling bonds is complicated and time-consuming. In addition to speed, the EIB sees further advantages in the digitalization of capital markets, such as a reduction in fixed costs and greater transparency.
There are also risks, however, as this is a relatively new technology. Although the legal foundations were laid in 2021, crypto trading is only slowly gaining momentum in Germany.
According to Federal Financial Supervisory Authority BaFin, a total of around 155 crypto-securities were listed in the first three years after the law came into force.
Last year, however, trading picked up somewhat, with more than 120 new securities being added.