European Investment Bank Distributes $121 Million in Ethereum-based Digital Bonds

The European Investment Bank (EIB), the investment bank owned by the EU Member States, has announced the issuance of the organization’s first-ever digital bond built on a public blockchain. The bond was issued using Ethereum and the issuance invoked $121 million two-year bonds placed with key market investors.

EIB Issues Digital Bonds Built With Ethereum Technology

The EIB, a not-for-profit organization and lending arm of the European Union announced on Wednesday that the bank has issued a new type of digital bond built using blockchain technology.

On April 28, 2021, the EIB explained that the bank had also worked on the digital bond project with the financial institutions Goldman Sachs, Santander, and Societe Generale. The EIB also disclosed that the Banque de France participated and said “the payment of the issue monies from the underwriters to the EIB has been represented on the blockchain in the form of CBDC.”

“Innovation at the EIB goes beyond the projects we are supporting. As a global leader in the green and sustainability bond markets, the EIB is clearly well‑placed to lead the way now in the issuance of digital bonds on [a] blockchain,” EIB Vice President Mourinho Félix remarked during the announcement. “These digital bonds will play a role in giving the Bank a quicker and more streamlined access to alternative sources of finance to boost finance for projects across the globe.”

The EIB is considered one of the largest backers of green finance in the world. The financial institution thinks that the digitalization of capital markets will benefit market participants in the future. Benefits include the reduction of third-party costs, transparency, and “faster settlement speed.” A person familiar with the matter told Bloomberg that “the notes have a zero percent coupon and will be registered in the public Ethereum blockchain network after pricing.”

The EIB announcement further notes:

Similar to the EIB’s role in green bonds or risk-free rates, the new digital bond issuance may pave the way for market players to adopt blockchain technology for the issuance of financial securities.

Blockchain to Help the Bank’s Position in Capital Markets’ Innovation

The Director-General Finance at the EIB, Bertrand de Mazières, believes this is a milestone for the European lender and thinks it cements the bank’s “position in capital markets’ innovation.” The EIB Director thinks the steps taken by the bank will pioneer more blockchain innovation when it comes to issuing financial securities.

“By helping to create a framework for a new market ecosystem, the EIB believes this will bring value added for both issuers and investors, while contributing to an innovative, efficient and secure market infrastructure,” the EIB Director’s statement concluded.