EIB issues first digital bond on Ethereum blockchain

The European Central Bank (EIB) has issued its first ever digital bond on public blockchain platform Ethereum.

The two-year bond, which is worth €100 million, was launched in partnership with Goldman Sachs, Santander, and Societe Generale.

The central bank for the eurozone said that in collaboration with Banque de France, the payment of the issue monies from the underwriters to the EIB has been represented on the blockchain in a central bank digital currency (CBDC) format.

The transaction consists 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, Goldman Sachs, Santander, and Societe Generale, will then settle the underwriting against the issuer using a representation of central money, the CBDC. The principal is expected to be repaid in commercial fiat at maturity.

The EIB thinks that the digitalisation of capital markets could bring a number of benefits to the market, 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,” said EIB vice president Mourinho Félix. “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.”

Félix said that 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 global projects.

The bank’s director general finance, Bertrand de Mazières, said that the transaction marks its first ever step in the use of blockchain tech 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,” he said.

Richard Gnodde, chief executive of Goldman Sachs said the transaction confirms the EIBs position as a pioneer in the market.

“This is an important step in the adoption of this innovative technology and the potential efficiencies that can be derived across the life cycle of the debt issuance,” said the chief exec.
Chief executive of Societe Generale, Frédéric Oudéa, said: “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.”

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