EIB issues its first digital bond in pound sterling
The European Investment Bank (EIB) has priced its first ever £50 million digital bond.
The bond was completed using a combination of private and public blockchains operated and accessed via HSBC Orion - the bank 's tokenisation platform.
It follows the recently adopted Luxembourg legal framework tailored to allow for the issuance, transfer and custody of dematerialised securities on distributed ledger technology (DLT) infrastructure.
The encrypted private blockchain serves as the record of legal ownership of the digital bonds and provides an operational framework to manage the floating rate instrument and its lifecycle events.
The public blockchain is used for information purposes and provides increased transparency to investors and the market as to holdings of the digital bonds on an anonymised basis.
The dematerialised digital bonds will be held in digital securities accounts kept on HSBC Orion. The BNP Paribas Securities Services business in Luxembourg, RBC and HSBC will act as custodians for existing clients who invest in this digital bond.
The pioneering vision of digital bonds intends to bring benefits to market participants by reducing costs, improving efficiency and allowing for real-time data synchronisation across participants.
The architecture � distributed between BNP Paribas, HSBC and RBC Capital Markets � sees HSBC acting as central account keeper recording transactions in the digital bonds on the secure HSBC Orion platform.
EIB was advised in this transaction by Clifford Chance while the joint lead managers were advised by Allen & Overy.
EIB vice-president Ricardo Mourinho Felix said: “The EIB 's role as the EU public policy bank goes beyond acting as an ordinary bank. We promote innovative and disruptive solutions, as demonstrated 15 years ago with the very first green bond issuance.
“The time has come for further innovation in the financial sector, and we are pleased to issue the first digital bond in pound sterling on a private and public blockchain with the support of our counterparts. ”
Blockchain is a digital and distributed ledger of transactions using advanced cryptographic techniques and the contribution of a network of participants.
The participants jointly validate the transactions in blocks in an ordered and immutable sequence (hence the name “blockchain ”).
This combination of features primarily aims to provide enhanced security and operational efficiency without resorting to a centralised registry to keep track of bondholders.
BNP Paribas head of digital assets for debt capital markets Benjamin de Forton added: “After the successful euro-denominated trades, the EIB is now launching the world 's first ever digital bond denominated in pound sterling.
“This bond is testing the potential of tokenisation on a private ledger for safety and efficiency combined with disclosure on a public ledger for transparency. We are honoured to partner with the EIB in exploring the usage of tokenisation in capital markets. ”