China Construction Bank (CCB), in cooperation with Fusang Exchange, a licenced securities exchange in Malaysia, plans to raise $3bn through the launch of blockchain-based digital bonds.
CCB has created Longbond, a special purpose vehicle (SPV) to issue the bonds and to deposit the proceeds with the bank.
Investors are allowed to directly invest in the digital bonds with amounts as little as $100 through the Fusang Exchange. They are also facilitated with direct trade-in or trade-out of the bond using bitcoin.
According to CCB Labuan, the offering is expected to add legitimacy and investor confidence to cryptocurrency and decentralised finance.
The bond issue further offers investors access to bank-secured deposits at an annualised rate of LIBOR +50bps (0.70%), which is claimed to be higher than market interest rates for a general fixed deposits.
Digital bonds will be backed by CCB
The bonds will be backed by the balance sheet of the world’s second-largest bank CCB.
CCB Labuan principal officer Felix Feng Qi said: “CCB Labuan is happy to play its role as lead arranger for the first publicly listed debt security on a blockchain. The issuance serves to narrow the divide between FinTech and the wider financial markets.
“CCB Labuan will continue to work on expanding the technological boundaries to provide value added products and services to our customers, clients, and associates.”
To be issued at a discount, the blockchain bonds will be made available for trading on Fusang Exchange before maturity in both USD and Bitcoin.
As per CCB Labuan, implementing blockchain will enable financial inclusion, reduces service delivery costs, while increasing transactional efficiency.
CCB Labuan will serve as the lead arranger and listing sponsor for the blockchain-based bond issue.
