EIB and Goldman Sachs Issue First Euro-Denominated Digital Bond on a Private Blockchainby Fintechnews Switzerland December 5, 2022
The European Investment Bank (EIB) — in collaboration with Goldman Sachs Bank Europe, Santander and Société Générale — launched Project Venus, their second euro-denominated digitally native bond issue and first using private blockchain technology.
The €100 million, two-year bond was issued, recorded and settled using private blockchain-based technology, and represents the inaugural issuance on Goldman Sachs’ tokenisation platform – GS DAPTM.
Banque de France and the Banque centrale du Luxembourg took part in the project to provide a digital representation of euro central bank money in the form of tokens. Société Générale Security Securities Services (SGSS Luxembourg) and Goldman Sachs Bank Europe SE acted respectively as on-chain custodian and account keeper.
Project Venus consists of the issuance by the EIB of a series of bonds on a blockchain, where investors purchased and paid for the security tokens using traditional currency. The joint lead managers — Goldman Sachs Bank Europe SE, Santander and Société Générale — then settled the underwriting against the issuer using a representation of central bank money, the central bank digital currency.
- The transaction paves the way for future on chain derivative solutions, by using the first interest rate swap hedge represented through the industry developed common domain model (CDM).
- The new digital bond is the first syndicated deal settled T+0 and the first cross-chain Delivery vs Payment (DVP) settlement using an experimental CBDC token.
- The issuance is also the very first digital bond executed under the Luxembourg law.
- Blockchain is a digital and distributed ledger of transactions using advanced cryptographic techniques and the contribution of a network of participants. The participants jointly validate the transactions in blocks in an ordered and fixed sequence (hence the name blockchain). This combination of features primarily aims to provide enhanced security and operational efficiency without resorting to a single registry to keep track of bondholders.
A pioneer in green and sustainable bonds, the EIB has been exploring the benefits of the digitalisation of capital markets to bring the benefits to market participants. In April 2021, the EIB issued its first digital bond. With its second fully digital bond, the EIB is continuing to lead the way for other market players to adopt blockchain technology. Unlike some cryptocurrencies using blockchain technology, the EIB’s blockchain bond issues do not lead to extensive energy use.
EIB Vice-President Ricardo Mourinho Félix said:
“Blockchain has the potential to disrupt a wide range of sectors. It plays a central role in the success of Europe’s green and digital transitions, and strengthens our technological sovereignty. Innovation is part of the EIB’s identity and issuing this fully digital bond is another important step in helping to develop a fully digital ecosystem.”
Mathew McDermott, Global Head of Digital Assets at Goldman Sachs added:
“With this new digital bond, EIB is again showing its leadership in capital markets, pushing innovation further by pricing the first syndicated digital bond on a private permissioned chain and settling T+0 across two blockchain networks. The transaction also marks the launch of Goldman Sachs’ proprietary Tokenisation Platform – GS DAPTM ,and we are excited to take part in this initiative alongside EIB, Banque de France and the Banque centrale du Luxembourg.”
Featured image credit: Edited from Freepik