KfW, the largest development bank in Germany and owned by the German states, has teamed up with Boerse Stuttgart Digital (BSD) as infrastructure provider partner in preparation for its upcoming blockchain-based digital bond offering, the companies said in a Monday press release.

KfW plans the bond issuance in the coming weeks under the German Electronic Securities Act (eWpG). BSD will oversee the crypto wallets and secure the private keys during the issuance and redemption processes.

The upcoming offering will be part of the European Central Bank's trials to settle blockchain-based transactions against central bank money.

"As one of the world's largest and most active bond issuers, we are actively driving digitalisation initiatives in the issuing and settlement process," Gaetano Panno, head of transaction management at KfW, said in a statement. "The utilization of new technologies as part of the ECB trials enables us to technically process a 'delivery vs. payment' transaction and thus supports our digital learning journey."

KfW's issuance is the latest example of traditional financial institutions exploring ways to put traditional financial instruments such as bonds, credit and funds on blockchain rails. The process, also known as tokenization of real-world assets (RWA), promises operational benefits such as faster and more transparent transaction settlements, lower costs and greater efficiency and transparency.

Read more: McKinsey Sees Just $2T of Tokenized RWAs by 2030 in Base Case, With Broad Adoption 'Still Far Away'

Last month, Italy's state-owned development bank Cassa Depositi e Prestiti SpA (CDP) and lender Intesa Sanpaolo completed a blockchain-based bond issuance as part of an ECB trial.

KfW's upcoming digital bond issuance will follow the lender's first tokenized security offering, a 100 million euro ($108 million) digital bond in July using the Polygon (MATIC) network.