- The EIB is continuing to spearhead developments in the digitalisation of capital markets with the first fully digitally native bond issue on a private blockchain.
- It is pushing innovation even further with this second digital transaction (the first on a private blockchain), issuing the first digital bond with same-day settlement in cooperation with Banque de France and Banque centrale du Luxembourg.
- Project Venus is also the first syndicated digital bond issued by a public institution to be admitted on the Luxembourg Stock Exchange’s Securities Official List.
- In addition to issuance on blockchain, hedging activity leveraged the industry developed Common Domain Model for interest rate swaps, in a market first implementation and step towards more consistent data structures across the industry.
The European Investment Bank (EIB) — in collaboration with Goldman Sachs Bank Europe, Santander and Société Générale — launched Project Venus, their second euro-denominated digitally native bond issue and first using private blockchain technology. The €100 million, two-year bond was issued, recorded and settled using private blockchain-based technology, and represents the inaugural issuance on Goldman Sachs’ tokenisation platform – GS DAPTM.
Banque de France and the Banque centrale du Luxembourg took part in the project to provide a digital representation of euro central bank money in the form of tokens. Société Générale Security Securities Services (SGSS Luxembourg) and Goldman Sachs Bank Europe SE acted respectively as on-chain custodian and account keeper.
Project Venus consists of the issuance by the EIB of a series of bonds on a blockchain, where investors purchased and paid for the security tokens using traditional currency. The joint lead managers — Goldman Sachs Bank Europe SE, Santander and Société Générale — then settled the underwriting against the issuer using a representation of central bank money, the central bank digital currency.
- The transaction paves the way for future on chain derivative solutions, by using the first interest rate swap hedge represented through the industry developed common domain model (CDM).
- The new digital bond is the first syndicated deal settled T+0 and the first cross-chain Delivery vs Payment (DVP) settlement using an experimental CBDC token.
- The issuance is also the very first digital bond executed under the Luxembourg law.
Blockchain is a digital and distributed ledger of transactions using advanced cryptographic techniques and the contribution of a network of participants. The participants jointly validate the transactions in blocks in an ordered and fixed sequence (hence the name blockchain). This combination of features primarily aims to provide enhanced security and operational efficiency without resorting to a single registry to keep track of bondholders.
A pioneer in green and sustainable bonds, the EIB has been exploring the benefits of the digitalisation of capital markets to bring the benefits to market participants. In April 2021, the EIB issued its first digital bond. With its second fully digital bond, the EIB is continuing to lead the way for other market players to adopt blockchain technology. Unlike some cryptocurrencies using blockchain technology, the EIB’s blockchain bond issues do not lead to extensive energy use.
EIB Vice-President Ricardo Mourinho Félix said: “Blockchain has the potential to disrupt a wide range of sectors. It plays a central role in the success of Europe’s green and digital transitions, and strengthens our technological sovereignty. Innovation is part of the EIB’s identity and issuing this fully digital bond is another important step in helping to develop a fully digital ecosystem.”
Mathew McDermott, Global Head of Digital Assets at Goldman Sachs said: “With this new digital bond, EIB is again showing its leadership in capital markets, pushing innovation further by pricing the first syndicated digital bond on a private permissioned chain and settling T+0 across two blockchain networks. The transaction also marks the launch of Goldman Sachs’ proprietary Tokenisation Platform – GS DAPTM ,and we are excited to take part in this initiative alongside EIB, Banque de France and the Banque centrale du Luxembourg.”
John Whelan, Managing Director of Digital Assets at Santander said: "Once again, Santander is delighted to work with the EIB on this innovative bond transaction that provides a new landmark in the digital securities market. Blockchain technology can offer significant operational improvements, speed and efficiency to the capital markets and this deal brings those benefits a step closer.”
Jean-Marc Stenger, CEO of Societe Generale FORGE, Societe Generale Group’s digital asset subsidiary said: “This new digital bond issuance by the European Investment Bank (EIB) marks another significant milestone in the digitalization of Euro capital markets. Societe Generale is honored to be associated again with EIB’s second digital euro project, which once again highlights the Group’s leadership in the Distributed Ledger Technology (DLT) for cash, for securities and in debt capital markets. Participating to this transaction using two private DLTs for cash & securities allows Societe Generale to increase interoperability between public & private DLT infrastructures and serve more efficiently our clients. Having Societe Generale Securities Services (SGSS) in Luxembourg involved in the project as a key contributor also demonstrates the firm-wide commitment to digital innovation globally across jurisdictions.”
Arnaud Delestienne, Director of International Capital Markets and Member of the Executive Committee at LuxSE said: “We are delighted to build on our longstanding and close relationship with the EIB, and for our exchange to have been chosen as the venue of choice for this digitally native bond. This marks yet another firm step towards the digitalisation of capital markets, which we wholeheartedly support, and we are confident that this move will help further accelerate the adoption of the DLT technology in global debt capital markets operations."
Laurence Arnold, Head of Innovation Management and Strategic Initiatives at AXA IM commented:” This transaction is yet another milestone in our innovation journey, as we continue our experimentation of investing in security tokens, discovering different technologies, mechanisms and features, for the ultimate benefit of our clients. Going forward, we aim to continue to be an active participant in the design of this new ecosystem.”
Christoph Hock, Head of Multi-Asset Trading, Union Investment: “As we continue to experiment with blockchain technology, we welcome the opportunity to invest in this new digital bond by the EIB, this time on a private permissioned network. The innovative features of this issuance add another page to our learning journey as we expect this technology to be a major part of how capital markets transact in the future. Once again the strength of our internal teamwork, as well as the responsiveness and cooperation with DZ Bank as a depositary, the EIB and Goldman Sachs as platform operator were key in getting us over the line in time.”
Summary terms and conditions for the new bond issue
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Issue amount |
€100 million |
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Pricing date |
29 November 2022 |
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Settlement date |
29 November 2022 |
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Maturity date |
29 November 2024 |
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Coupon |
2.507%, annual |
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Re-offer yield |
2.507% |
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Re-offer price |
100% |
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Governing law |
Luxembourg law |
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Admission |
Luxembourg Stock Exchange SOL (Securities Official List) |
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Joint lead managers |
Goldman Sachs Bank Europe SE, Santander, Société Générale |
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Legal advisors |
Clifford Chance (to EIB) Allen & Overy LLP (to the joint lead managers) Ashurst (to GS DAP™) |
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Blockchain |
Private blockchain-underpinned platform, via tokenisation platform operated by Goldman Sachs |
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Central Account Keeper |
Goldman Sachs Bank Europe SE |
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Account Keeper |
Societe Generale Securities Services Luxembourg (SGSS Luxembourg) |