The European Investment Bank (EIB) has taken a further step in digitizing capital markets by issuing its first £50m digital bond. The issue, which uses a mix of public and private blockchains, is backed by BNP Paribas, HSBC, and RBC Capital Markets as joint lead managers.
Digital bonds are registered on a private blockchain which ensures privacy and efficiency, while a mirror registry on a public blockchain provides greater transparency anonymously.
The blockchain as a tool
The Vice President of the EIB, Ricardo Mourinho Felix, declares that he is "promoting innovative and disruptive solutions in the financial sector." The EIB takes a further step in its technological development and uses the blockchain as a tool, to issue the first digital bond in sterling on a public and private blockchain "with the support of our counterparties", says the vice president.
It seems that the pioneering vision of the EIB when issuing digital bonds seeks to provide benefits to market participants by reducing costs, improving efficiency, and allowing real-time data synchronization between participants.
The EIB's private encrypted blockchain serves as the legal ownership record for digital bonds and provides an operational framework for managing the floating rate instrument and its life cycle events. Instead, the public blockchain is used for informational purposes and provides greater transparency to investors and the market regarding digital bond holdings, the European Investment Bank clarifies.
A collaborative project
The digital bonds will be held in digital securities accounts at HSBC Orion, with BNP Paribas Securities Services business in Luxembourg, RBC, and HSBC acting as custodians for existing clients investing in the digital bond. The architecture is distributed between BNP Paribas, HSBC, and RBC Capital Markets, with HSBC acting as the central account manager that records transactions in the digital bonds on the secure HSBC Orion platform.
A step towards adoption?
The fact that the European Investment Bank (EIB) issued the first sterling digital bond on a public and private blockchain seems to be a big step towards the adoption of cryptocurrencies and blockchain technology in the traditional financial sector.
The project shows that institutional investors trust the security and transparency of transactions in blockchain technology. In addition, this initiative promotes greater efficiency and speed in financial operations, which is good news for investors. In general, the EIB project can be a catalyst for growth and innovation in the financial sector, or simply a bait to disguise themselves as pioneers and defenders of blockchain technology.
Everything will depend on the development and adoption of the project in the near future, will this be the first of many blockchain initiatives at the EIB?