The European Investment Bank (EIB) has taken a major step towards the future of financial markets with its first-ever pound sterling-denominated digital bond using blockchain technology. Worth £50 million, the bond has been praised as a sign of the “time for further innovation in the financial sector” by ECB Vice-President Ricardo Mourinho Felix.
“This new financial tool will provide additional capital flow that the EIB will invest in projects with global impact,” he said.
The bonds, which bear a floating interest rate and are registered on a private blockchain, are available via HSBC Orion and distributed by BNP Paribas, HSBC and RBC Capital Markets. The bank noted the benefits of reduced costs, improved efficiency and real-time data synchronization.
“We are continuing to spearhead market developments in the digitalization of capital markets with a fully digitally native bond issuance in pound sterling,” the bank said in a statement.
This latest launch follows the EIB’s issuance of a $100 million 2-year digital bond in April 2021 and its announcement of Project Venus, the first euro-denominated digital bond, in the last quarter of 2022.
As blockchain technology continues to gain traction in the financial world, established banks and institutions are jumping on board. In November 2022, Hong Kong’s financial authorities announced plans to issue tokenized government green bonds, while the National Australia Bank stated its intention to issue a fiat backed stablecoin. The Bank for International Settlements, Hong Kong Monetary Authority, and the United Nations Climate Change Global Innovation Hub are also working on green bonds.
The EIB’s £50 million pound sterling-denominated digital bond is a major milestone in the adoption of blockchain technology in the financial sector. The bank’s commitment to digital innovation and its previous experiences in issuing digital bonds show its confidence in the potential of this technology. The benefits of reduced costs, improved efficiency, and increased transparency make blockchain a compelling option for financial institutions looking to stay ahead of the curve.
As other established banks and financial institutions follow suit, the use of blockchain technology in the financial sector is likely to become more widespread. This has the potential to revolutionize the way capital is raised, allocated and traded, leading to a more efficient and transparent financial system.