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One of China’s Largest Banks Uses Blockchain for Bond Issuances

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This October, President Xi Jinping of China revealed in a statement to some of the nation’s top officials that he would be pushing for the formal adoption of blockchain technologies.

Xi’s statement implied that he has high ambitions for this blockchain push, with the world leader mentioning finance and healthcare to supply chains as industries that this fledgling class of technologies could improve.

And it seems that things are off to a good start.

Chinese media reported late last week that one of the region’s largest banks, the Bank of China has used blockchain to issue bonds, marking a positive step forward for proponents of the technology in a time when Bitcoin, something integral to the broader blockchain industry, is seemingly on thin ice.

China

Bank of China Taps Blockchain

According to an article from Chinese business news site Sina Finance released on Friday last week, the Bank of China — one of the biggest state-owned commercial banks in China not to be confused with the central bank of the People’s Bank of China — recently completed the issuance of a 20 billion yuan (just around $2.8 billion U.S. dollars) worth of small enterprise and micro-enterprise bonds via blockchain.

A “self-developed” bond issuance system built on ledger technologies was the one utilized, the article asserts. The article implied that the bond was issued end to end by the blockchain system, mentioning that the program “covers the three stages of bond issuance, including preparation, bookkeeping filing, and pricing and placement.”

The Bank of China issued these bonds, which are two-year bonds with a coupon rate of 3.25%, to help support the development of smaller enterprises across China, thereby allowing the economy to expand.

This isn’t the first time that the Bank of China has dabbled in blockchain.

In July, the bank released an extensive article on the Bitcoin phenomenon. The authors of the odd report, which came at a time when blockchain and digital assets were still vehemently verboten in the region, mentioned how Bitcoin works, why the prices of cryptocurrencies are rising over time, and why BTC inherently has value.

That’s not all. An infographic contained in the article portrays key points in the history of the cryptocurrency space. It makes mention of the infamous Bitcoin pizzas, Warren Buffett’s thoughts on cryptocurrency, the 21 million coin supply cap, and its tumultuous price trends over the years.

Other Banks Are Using Blockchains for Bonds Too

This is far from the first time that a large institution has used blockchain for bond issuance.

Banco Santander, the largest bank in Spain and the 16th largest bank in the world, earlier this year issued the “first end-to-end blockchain bond” using Ethereum and ERC-20 tokens.

The $20 million bond offers a “quarterly coupon of 1.98%” through the bank’s Securities Services department, which is “acting as tokenization agent and custodian of the cryptographic keys” for the investment vehicle.

In other words, Santander turned a bond into a security token. While it isn’t clear if this was more profitable than the presumably analog system the bank used prior, Santander CFO José García Cantera has said:

“Santander is at the forefront of the profound digital transformation of the financial sector and this transaction is one example. We want to take advantage of any technology that can accelerate that process, so that our customers thrive and be faster and more efficient, and blockchain is one of those technologies.”

There’s also Fat Burger, the fast food and American food restaurant chain which earlier this year partnered with Cadence, a Coinbase-backed company, to issue $30 million worth of bonds via Ethereum in a move similar to Santander’s.



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I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact NickC@blockonomi.com

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