Capital markets News

Goldman, Santander, SocGen help European Investment Bank issue €100m public blockchain bond

european investment bank EIB

According to Bloomberg, the European Investment Bank (EIB) has mandated Goldman SachsSantander and Société Générale to be joint lead managers for a €100 million bond issuance on the Ethereum blockchain.

The issue date is 28 April for the two-year AAA-rated bond that complies with French law and is targeted at professional clients. Two weeks ago, it was rumored that the bond was in the works. 

John Whelan heads up Digital Assets at Santander

While Société Générale and Santander have both previously issued bonds on the public Ethereum network, those bonds or security tokens were bought by associated entities. In contrast, the EIB bonds are being sold to third parties, so it’s a much bigger milestone. Update: The EIB said settlement used central bank digital currency.

The amount matches the first Société Générale bond issuance, but the French bank followed it up with a second bond for €40 million settled with a trial central bank digital currency. Santander’s bond was for €20 million.

While today’s transaction is a big step forward, it doesn’t fully exploit all the benefits of distributed ledger technology (DLT). One of the advantages of blockchain is to digitize a still relatively manual bond issuance process. Another benefit is the potential to provide a blockchain shared registry without a central securities depository (CSD), although the EU currently requires a CSD for securities issuance. The possibility of instant settlement or delivery versus payment also removes counterparty risk. However, in this case, payment is the next day (T+1).

Other government-related institutions that have adopted blockchain for bonds include the World Bank and retail treasury bonds issued by the banks of Thailand and the Philippines. However, these all used permissioned blockchains.