The EIB has announced it launched a digital bond issuance on a blockchain platform, deploying this distributed ledger technology for the registration and settlement of digital bonds, in collaboration with Goldman Sachs, Santander and Societe Generale.
In a partnership with Banque de France, the payment of the issue monies from the underwriters to the EIB has been represented on the blockchain in the form of CBDC.
The EIB believes that the digitalisation of capital markets may bring benefits to market participants in the coming years, including a reduction of intermediaries and fixed costs, better market transparency through an increased capacity to see trading flows and identity asset owners, as well as a much faster settlement speed.
Vice President Mourinho Félix, European Investment Bank (EIB) said, “innovation at the EIB goes beyond the projects we are supporting. As a global leader in the green and sustainability bond markets, the EIB is clearly well‑placed to lead the way now in the issuance of digital bonds on blockchain. These digital bonds will play a role in giving the Bank a quicker and more streamlined access to alternative sources of finance to boost finance for projects across the globe.”
This transaction consists in the issuance by the EIB of a series of bond tokens on a blockchain, where investors purchase and pay for the security tokens using traditional fiat. The Joint Lead Managers will then settle the underwriting against the issuer using a representation of central money, the Central Bank Digital Currency (CBDC). The principal is expected to be repaid in commercial fiat at maturity. The transaction will use Ethereum, a public blockchain protocol.
Bertrand de Mazières, Director General Finance at the EIB said, “in another testimony of EIB’s leading position in capital markets’ innovation, this transaction marks the EIB’s first step as a pioneer in the use of blockchain technology for the issuance of financial securities. By helping to create a framework for a new market ecosystem, the EIB believes this will bring value added for both issuers and investors, while contributing to an innovative, efficient and secure market infrastructure.”