Yesterday Slovenia issued a €30 million short dated digital bond on the BNP Paribas Neobonds platform. Settlement used the Banque de France’s wholesale central bank digital currency (CBDC) as part of the Eurosystem’s wholesale DLT settlement trials.
This is the first sovereign digital bond issuance in EMEA. While the European Investment Bank issued several digital bonds, it is owned by the EU’s member states but is financially autonomous. Hong Kong issued a $756 million digital green bond in February.
BNP Paribas acted as Global Coordinator, Sole Bookrunner and platform issuer with Clifford Chance handling the legal aspects.
“These initial transactions and experiments with wholesale tokenized central bank money represent an important steppingstone to greater transparency and efficiency of financial markets with wider technology adoption,” the Slovenian Government said in a statement. “While hardly material in financial markets at the moment in terms of value issued and/or traded, we expect the importance of the distributed ledger technology to grow significantly in the following years.”
BNP Paribas and tokenization
BNP Paribas has two tokenization platforms. Neobonds is part of its Global Markets division and uses Digital Asset’s Daml smart contract language and the Canton blockchain. The ownership of the Slovenian bond is recorded on the blockchain and smart contracts generate coupon payments and lifecycle events, including redemption on 25 November 2024. We’re guessing the duration of the bond may be tied to the Eurosystem settlement trials ending in November.
The second tokenization platform is AssetFoundry which sits within BNP Paribas CIB. It’s based on the public Ethereum network and the bank used it for a bond issuance for EDF in 2022. On 8 July BNP Paribas used it in another ECB settlement trial. This time it used the Bundesbank’s Trigger solution, which links to the TARGET2 real time gross settlement (RTGS) system. However, it was a simulated payment rather than using real money.
BNP Paribas said it plans to continue with additional real transactions and experiments using all three settlement solutions. Besides France’s DL3S CBDC and the BundesBank Trigger solution, Italy has the TIPS Hashlink Solution which also links to the RTGS.
The European Central Bank settlement trials have spurred significant tokenization activity. It follows the addition of 48 institutions to the second wave of trials that end in November.
