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China Construction Bank, the second largest bank in the world by assets, is collaborating with Malaysian and Singaporean partners to test blockchain technology for use in the bond market.
As previously reported, the China Construction Bank branch in Labuan, Malaysia initially pursued a partnership with a Labuan-based fintech firm to issue what was hailed as the first blockchain-based digital security to be issued by a Chinese financial institution.
CCB Labuan’s plan was to use the Ethereum blockchain to issue bonds and raise up to $ 3 billion in total, starting with a $ 58 million tranche, from both individuals and institutions.
Within days of the announcement, however, the bond issue was postponed until further notice and trading of the first tranche, in the form of tokenized certificates of deposit, was not pursued on the Labuan-regulated Fusang Exchange.
On December 3, a new announcement suggested that work on blockchain-based issuance has not been suspended entirely, but that some of the key players have changed. The National Stock Exchange of Malaysia, Bursa Malaysia and the Labuan Financial Exchange are both involved and there is no mention of the Fusang Stock Exchange.
Fusang specifically supports cryptocurrency trading, so traders were expected to be able to trade Bitcoin (BTC) for US dollars to buy the bonds.
Instead of the Ethereum blockchain, a proof of concept for the bond is now being explored with STACS, a Singapore-based fintech development firm specializing in the use of blockchain technology in capital markets. STAC developed a blockchain-based platform, dubbed Trident, and received a proof-of-concept grant for financial sector technology and innovation from the Monetary Authority of Singapore.
In addition to CCB Labuan and Bursa Malaysia, other proof-of-concept partners include national regulators, the Labuan Financial Services Authority and the Securities Commission of Malaysia, as well as two banks, CIMB Investment Bank Berhad and Maybank Investment Bank Berhad. also as Maybank. According to the announcement:
“Using […] Trident […] Bond models have been mirrored on smart contracts for quick implementation, while operational workflows have been streamlined to increase efficiency and flexibility in settlement cycles. Together with CCB Labuan, CIMB and Maybank, the [proof-of-concept] simulated several bond issues that were all issued and managed on the STACS Blockchain. “
The people involved say that this successful collaboration between private sector fintech firms, banks and regulators demonstrates the increased efficiency and transparency that blockchain technology can bring to the bond market. Further co-development of the technology is in the works for the next phases of the project.
