China Construction Bank used the blockchain to issue the first tranche of a bond package worth 3 billion dollars
China Construction Bank (CCB) worked with a fintech company in Labuan, Malaysia, on the first blockchain bond issue in the history of Chinese financial institutions.
Among the „Big Four“ of the banking system of the People’s Republic of China, CCB is ranked second in the ranking of the world’s largest banks by total assets, according to data from autumn 2020.
With the new issue of blockchain debt securities, the bank plans to raise up to 3 billion dollars in total, starting with a first tranche of 58 million dollars, aimed at private investors and financial institutions. The digital bonds will be issued through an offshore branch of CCB located in Labuan, at a minimum price of $100 each, and will have a maturity of three months. They will pay an annualized interest of 50 basis points above Libor, approximately 0.75%.
The innovation of the operation is that these bonds are used as tokenized certificates of deposit on the blockchain, and this allows the issuance of small securities; bonds not based on the blockchain are typically sold at much higher minimum prices, and are therefore offered almost exclusively to professional investors or other banks.
In addition, tokenized certificates of deposit will be traded on the Fusang exchange, which is regulated in Labuan. The real-time trading of the bonds will start on November 13. It should be noted that since Fusang allows cryptocurrency trading, traders will be able to trade Bitcoins (BTC) with US dollars for the purchase of the bonds, subject to payment of a commission.
Fusang’s CEO, Henry Chong, told reporters that if the bonds are popular, the digital exchange intends to launch similar products denominated in other currencies.
As noted by the Wall Street Journal, an annualized interest rate of 0.75% for bonds is higher than most bank rates offered on dollar deposits.
Residents of the United States and China, as well as companies or individuals in Iran and North Korea, will not be able to purchase the digital security. All proceeds will be deposited at CCB’s offshore branch in Labuan: the WSJ has described the small island as a tax haven.
Steven Wong, chief operating officer of CCB Malaysia, has made it clear that the entity does not deal with „Bitcoin or crypto“, but rather „bank deposits, this is our core business“. Felix Feng Qi, chief operating officer of CCB’s Labuan branch, clarified the innovative scope of the operation by pointing out that this is „the first listed blockchain debt security“.