Yesterday, Slovenia issued a €30 million short-dated digital bond on the BNP Paribas Neobonds platform. Settlement utilised the Banque de France’s wholesale central bank digital currency (CBDC) as part of the Eurosystem’s wholesale Distributed Ledger Technology (DLT) settlement trials.
This marks the first sovereign digital bond issuance in the EMEA region. While the European Investment Bank has issued several digital bonds, it is owned by the EU’s member states but operates financially autonomously. In February, Hong Kong issued a $756 million digital green bond.
BNP Paribas acted as Global Coordinator, Sole Bookrunner, and platform issuer, with Clifford Chance handling the legal aspects.
“These initial transactions and experiments with wholesale tokenised central bank money represent an important stepping stone towards greater transparency and efficiency in financial markets, with wider technology adoption,” stated the Slovenian Government. “Although currently not substantial in terms of value issued or traded, we anticipate the significance of distributed ledger technology to grow considerably in the coming years.”
BNP Paribas and Tokenisation
BNP Paribas operates two tokenisation platforms. Neobonds is part of its Global Markets division and uses Digital Asset’s Daml smart contract language and the Canton blockchain. Ownership of the Slovenian bond is recorded on the blockchain, and smart contracts generate coupon payments and lifecycle events, including redemption on 25 November 2024. It is likely that the bond’s duration is linked to the conclusion of the Eurosystem settlement trials in November.
The second tokenisation platform is AssetFoundry, which is within BNP Paribas CIB. It is based on the public Ethereum network and was used by the bank for a bond issuance for EDF in 2022. On 8 July, BNP Paribas utilised it in another ECB settlement trial, this time using the Bundesbank’s Trigger solution, which connects to the TARGET2 real-time gross settlement (RTGS) system. However, it was a simulated payment rather than using actual money.
BNP Paribas has announced plans to continue with further real transactions and experiments using all three settlement solutions. In addition to France’s DL3S CBDC and the BundesBank Trigger solution, Italy has the TIPS Hashlink Solution, which also connects to the RTGS.
The European Central Bank settlement trials have spurred significant tokenisation activity, following the addition of 48 institutions to the second wave of trials that conclude in November.