Italy’s Cassa Depositi e Prestiti Spa (CDP) issued a €25 million digital bond on the Polygon public blockchain, which was underwritten by Intesa Sanpaolo as the sole investor. The issuance is part of the European Central Bank’s (ECB’s) wholesale DLT settlement trials. Hence, the payment was made in central bank money using the Bank of Italy’s TIPS Hash Link solution, which provides connectivity between a DLT and the TIPS payment system.
CDP is a development bank majority owned by the Ministry of Economy and Finance.
The settlement of a public blockchain bond issuance with central bank money wasn’t the only novel aspect of the digital bond. It is also the first to use Italy’s ‘Fintech decree’ law. This was Italy’s enactment of the DLT Pilot Regime, but also applies to DLT issuances that are not part of the Pilot Regime (like this one), provided they take some extra steps. There must be a Digital Register maintained by a Digital Register Manager which is authorized by Consob, Italy’s securities regulator. The Register is a log of the real names and details of the owners of the securities.
“This transaction represents a significant step for CDP in capital market innovation through the pioneering adoption of blockchain technology for bond issues,” said Fabio Massoli, CDP’s Director of Administration, Finance, Control and Sustainability.
“The promotion of a new market ecosystem and the implementation of an innovative, efficient and secure market infrastructure will provide added value to issuers and investors alike, opening up new opportunities for other players, including SMEs.”
Fintech Decree Digital Registers
The Digital Register is similar to Germany’s eWpG law. In both cases they support direct securities issuances and transactions without requiring central securities depositories (CSDs) or bank intermediaries. However, we believe Italy may have gone a step further because it allows issuers to be the Digital Register Manager for their own securities. That’s the case here – CDP had the role of the Market DLT Operator and also the Consob authorized Digital Register Manager. But we believe this also applies where the issuer/manager is not a bank.
“We are particularly pleased to have been the first in Italy, together with CDP, to carry out an operation that is intended to be the point of reference for future issuers in a totally new legal and regulatory framework,” said Massimo Mocio, Deputy Chief and Head of Global Banking & Markets, IMI CIB Division of Intesa Sanpaolo.
A key goal of the ECB wholesale settlement trials is to test the interoperability between DLT networks and central bank money, both conventional and CBDC. Hence, the transactions involve delivery versus payment in most cases. However, CDP said the settlement for its digital bond was ‘same day’.
Meanwhile, the digital bond has a four month term. It was rated A-2 by S&P, F-2 by Fitch and S-2 by Scope.
