China Construction Bank has partnered with Hong Kong Fintech Center to release the first blockchain-based digital security system issued by a Chinese financial institution.
CCB is one of the “big four” banks in the People’s Republic of China and is ranked as the second largest in the world after total assets since fall 2020.
The huge bank’s plan to issue new blockchain-based debt is to raise a total of up to $ 3 billion, starting at $ 58 million, from individuals and companies. The digital bonds will be issued through CCB’s Foreign Office in Labuan, Malaysia for a minimum of US $ 100 each and will have a three-month maturity. They pay an annual interest rate of Libor plus 50 basis points, or about 0.75%.
The innovation is that these bonds are used as symbolic certificates of deposit on the blockchain that support the issuance of such small bonds; Non-blockchain-based bonds usually sell for a higher minimum price and are therefore only available to professional investors or other banks.
In addition, the encoded CDs will be traded on the Fosan Stock Exchange. The Labuan Regulated Stock Exchange will begin trading in live bonds on November 13. It is worth noting that Fosan supports cryptocurrency trading as traders will be able to exchange bitcoins (BTC) for US dollars to buy bonds. A commission is charged for transactions.
Fusang CEO Henry Chang told reporters that if bonds become popular, the digital exchange intends to release similar products denominated in other currencies. The bond yields 0.75% per annum over most US dollar deposit rates, as confirmed by The Wall Street Journal.
Taxpayers in the United States and China, as well as businesses and individuals in Iran and North Korea, will not be able to purchase digital security. All proceeds from the issue will be deposited at the CCB Maritime Branch in Labuan. Labuan is a small island called a tax haven by the Wall Street Journal.
Stephen Wong, COO of China Construction Bank in Malaysia, stressed that CCB “does not trade bitcoin or cryptocurrencies” but “accepts bank deposits, which is our core business.” However, this show was heralded as a major innovation. Felix Fen Kee, CCB CEO of CCB Offshore Operations in Malaysia and CEO of CCB Labuan, said it was “the first listed debt security on the blockchain.”