The Ethereum-powered digital bonds create a first-of-its-kind system that allows multiple parties to exchange information and verify transactions using a distributed blockchain network. A new blockchain platform developed by the Luxembourg Stock Exchange (CESX) has been approved by the European Investment Bank (EIB), making it the first major financial institution to use Ethereum-powered smart contracts. The EIB, which is owned by the European Union and based in Luxembourg, is the largest multilateral lender in the world.
The European Investment Bank (EIB) has announced that it will be issuing so-called Ethereum-based “smart bonds” to finance small and medium-sized companies within the EU. The EIB, which is owned and operated by the European Union, will be issuing the bonds on behalf of a new partnership between the EIB and the FinTech firm XYO Network. The FinTech firm will be offering the bonds to EU-based companies that are seeking to raise capital.
The European Investment Bank (EIB), an investment bank owned by EU member states, has announced the organization’s first public digital bond based on blockchain. The bond was issued using Ethereum, and the offering included a two-year $121 million bond issued to large market participants.
EIB issues digital bonds based on Ethereum technology
The EIB, the European Union’s non-profit organization and lender, on Wednesday announced a new type of digital bond created using blockchain technology.
On 28 April 2021, the EIB stated that the Bank is also working on a digital bond project with financial institutions Goldman Sachs, Santander and Société Générale. The EIB also announced the participation of the Bank of France and stated that the payment of the proceeds of the issue was submitted to the EIB by the blockchain subscribers in the form of CBDC.
Innovation at the EIB goes beyond the projects we support. As a global leader in green and sustainability bonds, the EIB is certainly well placed to play a leading role in the issuance of digital bonds on [blockchain], EIB Vice President Mourinho Felix said at the announcement. These digital bonds will enable the Bank to access alternative funding sources more quickly and efficiently to increase project finance globally.
The EIB is considered to be one of the largest providers of green funds in the world. The financial institution believes that the digitization of capital markets will benefit market participants in the future. Advantages include lower costs for third parties, transparency and quick settlement. A person familiar with the matter told Bloomberg that the bonds will have a zero percent coupon and will be registered on the public Ethereum blockchain once the price is set.
The EIB announcement continues
By analogy with the EIB’s role in issuing green bonds or risk-free interest rates, a new digital bond could pave the way for market participants to use blockchain technology to issue financial securities.
Blockchain will strengthen the Bank’s position in capital market innovation
According to Bertrand de Maiziere, EIB Chief Financial Officer, this is a major milestone for the European lender, consolidating the Bank’s position in capital market innovation. The EIB chief thinks the bank’s actions will pave the way for further blockchain innovations when it comes to issuing financial securities.
The EIB believes that by contributing to the creation of an innovative, efficient and secure market infrastructure, it will add value for both issuers and investors by helping to create the conditions for the new market ecosystem, the EIB Managing Director said.
What do you think about the European Investment Bank issuing blockchain bonds using Ethereum technology? Let us know what you think in the comments below.
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