Chinese Bank to Sell $3B Worth of Debt on Blockchain via Bitcoin
The second-largest bank in the world, Chinese Construction Bank, is set to sell $3 billion worth of debt on the blockchain using Bitcoin. This was revealed by a local news outlet South China Morning Post, today. The China Construction Bank will be partnering with Hong Kong Fintech firm Fusang to issue the debts on a blockchain. It is worth noting that this would be the first digital security issued by a Chinese bank using blockchain technology.
The debts will be tokenized on blockchain and broken into tiny bits of bonds. This bits will be sold in the form of a certificate of deposits. Similarly, bonds will be sold at a few thousand yuan to attract professional investors and smaller banks.
Each bond will have a minimum value of $100 and yield 0.75% at maturity, slightly higher than the 0.23% offered by local banks in China. China Construction bank intends to utilize funds from the bond sale to help small and medium banks.
Fusang will act as a broker for the Chinese bank and sell the first bit of bonds in its Malaysian exchange. The certificates of deposits will be issued through its Labuan branch with a tenor of three months.
Deal Opens the Door for More Investors
The deal will also allow more investors to trade the bank’s digital certificates using Bitcoin on Fusang Exchange. Fusang Exchange is a cryptocurrency exchange licensed by Labuan’s financial regulator, Malaysia.
Henry Chong, Chief Executive at Fusang, had earlier stated that trading of bonds would begin this Friday. He further added that the exchange hopes to work with the state-owned bank on other currencies’ issuance. Also, as a first tranche of the US$3 billion programs, the Chinese bank will make $58 million worth of digital certificates available for public subscription.
Bonds are tradable debt securities issued by governments or corporations to support spending commitments. Chinese bonds typically trade at tens of thousands of yuan (over $4,000), making it primarily available to institutional investors.