Beijing’s AIIB issues $300 million digital bond

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The Asian Infrastructure Investment Bank (AIIB) has issued a $300 million digital bond via a digitally native note (DNN), marking its first incursion into blockchain technology for finance.

The Beijing-based AIIB’s attempt at digital bond forms is a cornerstone of its environmental sustainability project, with the development bank hinting at future issuances. The issuance taps Citi (NASDAQ: C) as the issuing agent, while BMO Capital Markets offers dealer services for the offering, leaning on their vast market experience with digital bonds.

Listed on the Luxembourg Stock Exchange, AIIB’s bond eyes a global audience, with the offering receiving approval from the SIX Swiss Exchange and the Hong Kong Monetary Authority’s Central Moneymarkets Unit (CMU).

“As a multilateral development bank financing ‘Infrastructure for Tomorrow’ and with innovation in its DNA, AIIB sees this as an important opportunity to participate in the digitization of capital markets and help connect Asia and the world,” Domenico Nardelli, AIIB Treasurer, said.

A key feature of the bond is its reliance on Euroclear’s Digital Financial Market Infrastructure (D-FMI) for issuance. Apart from issuance, the clearing house also provides settlement services with the D-FMI, facilitating the administration and documentation of digital bonds in the markets.

The D-FMI has seen real-world utility from many institutions, including Citi, Goldman Sachs (NASDAQ: GS), Deutsche Bank (NASDAQ: DB), JP Morgan (NASDAQ: JPM), and the World Bank. Euroclear’s D-FMI attracts high-profile clients given its integration of Corda-based DLT infrastructure with traditional systems, allowing a vast pool of investors to participate in bond offerings.

AIIB Treasurer Nardelli says that the decision to turn to Euroclear’s DLT solution is not far-fetched given its streak of high liquidity for bonds leaning on it. Compliance with existing central securities depositories regulation (CSDR) is seen as an added advantage, while its guardrails against fragmentation make it an appealing solution for institutions outside the EU.

“The success of this transaction proves Euroclear’s D-FMI allows for easy and broad adoption of digital bonds at scale where market participants can buy and sell the bonds within their existing account structures,” said Nardelli.

AIIB jostling for supremacy with the ADB

Although the Asian Development Bank (ADB) operates on the same turf as the AIIB, the Beijing-based institution is keen on forging its path. The ADB has previously issued its digital bond with AIIB co-financing several ADB projects, hinting at increased levels of cooperation.

However, the U.S. sees the AIIB as China’s attempt to extend its influence over Asia while eyeing Africa and Latin America. A closer look at the data reveals that China holds a 26.54% vote share in the AIIB compared to its 5.44% share in the ADB.

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