China Construction Bank has partnered with Hong Kong-based fintech company Fusang to launch the sale of US$3 billion worth of debt on a blockchain, the first digital security issued by a Chinese bank on the technology.
Blockchain has made issuing conventional financial instruments, such as equities and bonds, possible at much lower costs as fewer financial intermediaries are involved in the process.The bond will be sold in the form of certificates of deposit, which are usually sold at several tens of thousand yuan each and attract mainly professional investors or other banks. They are often used for interbank funding, specifically for small to medium-sized banks in China.
By tokenising certificates of deposit on blockchain, retail investors can now buy the digital certificates in small amounts.
China Construction Bank’s certificates of deposit will be issued through its Labuan branch with a tenor of three months. Issued at a minimum of US$100 each, the certificates will yield about 0.75 per cent at maturity, higher than the roughly 0.25 per cent interest rate per annum interest rates at banks.
The deal also allows investors to trade these China Construction Bank’s digital certificates using bitcoin, on Fusang Exchange, a digital exchange licensed by the financial regulator in Labuan, Malaysia. Trading of the bond, which can also be done in US dollar, will begin this Friday.
If this transaction is a hit with investors, Fusang hopes to work with the state-owned bank on issuance in other currencies, including yuan, said Henry Chong, chief executive at Fusang.