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 DAP.
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 Luxembourg and Goldman Sachs Bank Europe SE acted as on-chain custodians.
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. This combination of features primarily aims to provide enhanced security and operational efficiency without resorting to a single registry to keep track of bondholders.
The EIB has been exploring digitalisation of capital markets to find benefits for market participants. In April 2021, the EIB issued its first digital bond. The EIB’s blockchain bond issues are reportedly low energy use, in contrast to the extensive energy use reported for cryptocurrency systems.
Christoph Hock, head of multi-asset trading at Union Investment, said, “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.”
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 DAP, and we are excited to take part in this initiative alongside EIB, Banque de France and the Banque centrale du Luxembourg.”
©Markets Media Europe 2022
