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European Investment Bank issues its first ever digital bond on a public blockchain

Autor: Financial Market
Timp de citit: 3 minute

European Investment Bank 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.

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,” Vice President Mourinho Félix, European Investment Bank (EIB).

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.

“It is an honour for us at Union Investment as a leading European asset manager to participate in this landmark transaction with the renowned high quality issuer EIB. We expect the use of blockchain in combination with tokenization to become a game changer for the industry. We have been working on this innovative technology for several years and see a chance that it will be established as a market standard in the future. The close internal teamwork and the cooperation with DZ Bank as a depositary, the EIB and the joint lead managers were key for us to realize this deal in a very short period of time.”

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Frédéric Oudéa, Chief Executive Officer at Societe Generale: This pioneer bond issuance on a public blockchain settled with a central bank digital currency involved Societe Generale – FORGE, three international banks and two major institutions: the EIB and Banque de France. It demonstrates the appeal of Distributed Ledger Technology-based projects in the developing EU digital capital markets. This is a new milestone for Societe Generale – FORGE which completes Societe Generale recognized expertise in Capital Markets with a full Digital Asset offer.

Blockchain is a digital and distributed ledger of transactions using advanced cryptographic technics and the contribution of a network of participants to jointly validate the said transactions by blocks in an ordered and immutable sequence (hence the name ‘Blockchain’). This combination of features primarily aims at providing enhanced security and operational efficiency.

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.

Summary Terms and Conditions for the new bond issue

• Issue Amount: EUR 100m

• Pricing Date: 27 April 2021

• Settlement Date: 28 April 2021

• Maturity Date: 28 April 2023

• Coupon: 0.000%, annual

• Re-offer Yield: -0.601%

• Re-offer Price: 101.213%