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

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

The AAA-rated note offers a 4% coupon and matures in January 2027. It was issued on Euroclear’s distributed ledger (DLT) platform. This is the first time an institution in Asia has used 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 managing the distribution and settlement processes between the issuer and investors. BMO Capital Markets served as co-dealer alongside Citi, which also acted as issuing and paying agent.

AIIB Treasurer Domenico Nardelli said the bank will assess secondary market demand before considering additional digital bond sales next year. This cautious approach reflects the nascent but growing nature of digital bonds in the fixed income market.

The successful issuance by the 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 the AIIB can increase transparency, reduce operational risks and improve the efficiency of 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.

Crypto Briefing recently addressed how the increase in the adoption of tokenized funds, driven by investments in government securities and highlighting a growing efficiency of asset investments.

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

On the bond side, Metaplanet Inc., a Japanese firm, recently announced plans to buy $6.3 million worth of Bitcoin. by a bond issue, thereby increasing the share price significantly.

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