China Construction Bank, a state-owned financial institution, has launched the nation’s first digital bond. Partnering with Hong Kong based company “Fusang,” the bank intends to sell three billion U.S dollars of debt on a digital exchange in Malaysia.
The bond will be sold via certificates of deposit (CDs) and will be available to everyday retail investors in smaller denominations. Each CD will be issued for 3 month terms at a minimum of $100. The deal will allow prospective buyers to trade these digital bonds with Bitcoin. Upon a successful launch, Henry Chong, chief executive at Fusang intends to expand to other currencies.
It is important to understand that this investment is not covered by China’s deposit insurance due. This is due to the fact of this being an offshore USD offering.
As a result of this new type of investment, it is possible to see other financial institutions following this trend. The idea of banks offering debt on the blockchain opens the door for more investors. The issuance of tools such as bonds and certificates of deposit on the blockchain lowers the cost of distribution for banks. In conclusion, this move will continue to tighten the gap of blockchain technology and traditional financial establishments.
