China Construction Bank to Sell $3bn Worth of Debt Using Blockchain
After spending the better half of the year heavily investing in the development of blockchain technology, China’s largest institutions seem ready to put their money where their mouth is. According to the latest report from the South China Morning Post, China Construction Bank, one of the largest banks in the country, will sell around $3 billion worth of debt using blockchain technology.
The bank, operated by the Ministry of Finance of the People’s Republic of China, has partnered with a Labuan-based fintech company called Fusang to facilitate the sale. Both the China Construction Bank and Fusan seem to have high hopes when it comes to this particular deal. Henry Chong, the chief executive officer at Fusang, told the South China Morning Post that if this transaction turns out to be a hit with investors, Fusang hopes to work with the state-owned bank on issuance in other currencies as well, which includes the yuan.
The $3 billion worth of debt will be sold in the form of certificates of deposit to make the investment vessel attractive to a large number of people. Bonds like these are usually sold for tens of thousands of yuan each, making them attainable only to a small number of professional investors and other banks looking to diversify their holdings. Issuing these certificates on a blockchain even further democratizes the offering as it allows retail investors to buy them in small amounts.
Issued at a minimum of $100 each, the certificates of deposit will be launched through China Construction Bank’s Labuan branch with a tenor of three months. The certificates are set to provide yields of around 0.75% at maturity, which is three times higher than the 0.25% interest rate currently offered by many banks. The principal officer of the bank’s Labuan branch, Felix Feng Qi, said in a press release on Wednesday that the issuance serves to “narrow the divide between fintech and the wider financial markets”.
What makes this a unique product is the fact that retail investors will also be able to buy it with cryptocurrencies. The deal between the bank and Fusan specified that investors can also trade these certificates using Bitcoin. According to the South China Morning Post, Fusang Exchange, a digital asset exchange arm of Fusan, will be facilitating these trades as it’s officially licensed by the main financial regulator in Labuan, Malaysia.
Retail investors will be able to begin trading the bond on Friday, Nov. 13, both in Bitcoin and fiat currencies, which will include the U.S. dollar, the company said.
Around $58 million worth of these digital certificates will roll out at the end of the week, the bank said, adding that the sale of the certificates will be arranged by the bank’s Beijing arm. The rest of the $3 billion debt will roll out in similar phases throughout the year. However, neither the bank nor Fusang revealed how long the sale will last.