World’s second-largest development bank AIIB raises $300M in first blockchain-based digital bond issuance

Mila August 23, 2024

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Key Takeaways

AIIB’s debut digital bond, backed by blockchain, matures in 2027.
Citi and BMO act as dealers and facilitators for AIIB’s $300 million bond issuance.

Beijing-based Asian Infrastructure Investment Bank (AIIB) has raised $300 million in its inaugural bond issuance using blockchain-based tech from Euroclear, the same blockchain platform used by the World Bank.

The AAA-rated note offers a 4% coupon and matures in January 2027. This was issued on Euroclear’s distributed ledger (DLT) platform. This marks the first time an Asia-based institution has utilized this blockchain-enabled system for bond issuance, and the first US dollar-denominated digital bond on the platform.

Citigroup Inc. and BMO Capital Markets played key roles in the transaction, with Citi handling distribution and settlement processes between the issuer and investors. BMO Capital Markets served as a co-dealer alongside Citi, which also acted as the issuing and paying agent.

AIIB Treasurer Domenico Nardelli stated that the bank will evaluate secondary market demand before considering further digital bond sales in the coming year. This cautious approach reflects the nascent but growing nature of digital bonds in the fixed-income market.

The successful issuance by AIIB follows in the footsteps of other major institutions exploring blockchain-based bond offerings. Notable examples include the World Bank and the European Investment Bank, both of which have conducted similar digital bond sales in recent years.

This development represents a significant milestone in the integration of blockchain technology into traditional financial markets. By leveraging distributed ledger technology, institutions like AIIB can potentially enhance transparency, reduce operational risks, and improve efficiency in the bond issuance and trading processes. With more institutions adopting blockchain-based technologies, such developments could lead to broader changes in how global fixed-income markets operate.

Sapphire

Crypto Briefing recently covered how increasing adoption of tokenized funds, driven by investments in government securities and highlighting a growing efficiency in asset investment.

For instance, Citi, Mastercard, and JPMorgan recently experimented with tokenizing a private equity fund through a shared ledger for asset settlement, recognizing vast improvements in automation and data standardization in traditional financial models.

On the matter of bonds, Metaplanet Inc., a Japanese firm, recently announced plans to purchase $6.3 million worth of Bitcoin through a bond issuance, consequently boosting its stock price significantly.