Insight into $3bn Worth ERC-20 Debt Issued by China Construction Bank
China Construction Bank (CCB), one of the largest banks in China issued digital securities in Malaysia and accepted cryptocurrency purchase, which is an unprecedented pioneering step among traditional Chinese financial institutions.
CCB’s action is also the first time for Chinese funded financial institutions to “touch the cryptocurrency”. Under the background that China’s central bank explicitly requires financial institutions not to participate in the business related to cryptocurrency transactions, CCB’s action requires considerable courage.
The funds raised by this issuance will be deposited in China Construction Bank’s Labuan branch (CCBL) in the form of fixed deposits due in February 2021. These debts will be listed on Fusang exchange in the form of crypto token, with prices quoted in US dollars and BTC, and deployed on the Ethereum blockchain through ERC-20 protocol.
Labuan is a small offshore financial center in Malaysia and a tax evasion haven. The digital bond will be listed on the Fusang exchange which also facilitates the trading of cryptocurrencies.
Background of Fusang exchange and place of debts issuance
As a federal region of Malaysia, Labuan has an independent tax policy and faces enterprises all over the world. It is responsible for the development of banking and insurance, trust and fund management, investment holding. Similar to Hong Kong, China’s Hainan province and Hengqin district are expected to become similar places as the offshore special zones of the country.
The Fusang exchange accepts bitcoin as a form of payment. For investors who want to buy the digital debts, the exchange will convert the bitcoin received into U.S. dollars for them to buy the debts.
Unlike many of the newly-born digital stock exchanges, who hold the so-called ATS trading license. Fusang exchange holds the securities trading license fully authorized by the Securities Regulatory Commission of Malaysia, making it the same as traditional exchanges like stock exchanges in Hong Kong and Malaysia.
However, the applying price of securities licenses in the Labuan is not expensive, even lower than that of Vanuatu, where many financial trading platforms often use to obtain regulatory shelter.
About China Construction Bank
China Construction Bank Labuan Branch is a new institution established in October 2019, and its Malay branch was just established in 2016 as well as obtaining Malaysia’s first digital banking license and CNY clearing bank license.
Ji Zhihong, vice president of China Construction Bank, once said that in the future, Labuan branch will give full play to its license advantages and work together with the Malaysian subsidiary bank to better provide financial support and financial services for the economic and trade and investment exchanges between China and Malaysia, build a RMB clearing service network as soon as possible, actively promote the construction of offshore RMB market.
Information about digital debts
The debts are denominated in US dollars and redeemed in US dollars. Even if investors buy the bonds with BTC, they will be paid back in US dollars. CCB, the fundraiser, does not accept BTC as capital, which also means that investors will not enjoy the double returns of potential BTC appreciation and debts yield.