Euroclear this week “proved” that digital bonds can be issued without the need for regulatory change.
The firm, which is an international central securities depository (ICSD) and a major part of the fixed income market infrastructure, took part in the issuance of a €100 million digital bond for the World Bank on Monday.
The firm said this was the first time that financial market infrastructures had used distributed ledger technology (DLT) – commonly known as blockchain – seriously in a regulated environment and that it would act as a catalyst for central banks and regulators around the world to further digitise financial markets.
Euroclear believes that the bond issuance process for the World Bank proved that issuing these instruments in this way does not need regulatory change – which is often put up as a roadblock to digitising capital-market assets.
Regulatory requirements were met because Euroclear interprets the tokenised asset into book-entry form.
Issuance took place under UK law with Citi acting as issuer agent and TD Securities acting as dealer.
R3, a fintech backed by Citi, provided the technology on its Corda DLT platform and the records of the issuance integrate with legacy platforms as a traceable financial instrument, according to a spokesperson.
Euroclear said the transaction was the first to take place under its newly launched digital securities issuance service. The platform enables the issuance, distribution and settlement of fully digital international securities – or ‘digitally native notes’ – on DLT.
According to Euroclear, the use of Corda’s architecture demonstrated the capabilities of the platform to support the issuance and primary distribution part of the lifecycle of a bond under the existing legal framework applicable to an ICSD.
Antonio Queiroz, chief digital officer at Euroclear, said the issuance was a “major milestone” for Euroclear and for the “evolution of securities trading as a whole”.
David E. Rutter, CEO and Founder of R3, said: “This issuance is not a sandbox or proof of concept project – it is a live market issuance and it demonstrates the role DLT can play in transforming capital markets.
“[Financial market infrastructures] such as Euroclear play a critical role in the financial ecosystem. We’re working with them and central banks in areas such as securities settlement to improve how we communicate and exchange value, ultimately to deliver a better, more efficient, open, trusted and enduring digital economy.”
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