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China Construction Bank has partnered with a digital exchange to launch an offshore bond that is based on blockchain in a sign of growing interest in the technology from the country’s vast banking system.
The deal, which aims to raise up to $ 3 billion in total, will allow investors to purchase digital tokens backed by deposits at the bank’s branch in Labuan, an island tax haven in Malaysia.
The tokens will be available for purchase by ordinary investors on a local exchange specializing in digital assets and can be traded using dollars or bitcoins.
The move comes amid a broader push towards new technologies in China’s rapidly evolving financial sector, with the central bank working on a digital version of the renminbi after a period when online payment systems took off.
“China is big on the blockchain and all the big Chinese banks are mainly engaged in this sector,” said Henry Chong, CEO of Fusang Exchange, where the tokens will be exchanged and which uses blockchain technology to register ownership.
He said the deal will allow global investors to “benefit from access to an investment previously reserved only for larger institutions, along with low and transparent fees.”
The transaction works like a securitization, in which investors buy notes issued by a vehicle that deposits the proceeds with China Construction Bank Labuan (CCB Labuan). The bills, which are available as digital tokens, can be purchased for as little as $ 100 and are backed by underlying deposits at the bank.
The investment provides a return of 50 basis points on Libor, a commonly used interbank benchmark for the price of loans and contracts, or about 0.75 percent, which CCB Labuan and Fusang said in a joint statement “significantly higher than the market interest rates for deposits “.
They added that the bond was “the first digital security listed on a public exchange accessible directly to retail investors.”
Felix Feng Qi, principal officer of CCB Labuan, said the issue “serves to narrow the gap between fintech and broader financial markets.”
Late last year, Fitch Ratings said the application of blockchain technology in Chinese securitisations “appears to have proceeded at a faster pace than in other parts of the world.”
The rating agency added that the technology “has the potential to promote data transparency and transaction efficiency.”
China Construction Bank is the sponsor and lead arranger of the agreement. The tokens will start trading on Friday.
