European Investment Bank to issue 100 million euro digital bond on Ethereum

The European Investment Bank (EIB) will issue a batch of two-year notes worth 100 million euros on the Ethereum network, according to a Bloomberg report. The bonds may be priced on Tuesday.

The EIB has been at the forefront of innovation in Europe’s debt capital markets, being one of the first to issue green and sustainable development bonds as well as debt benchmarked to the new euro short-term rate, ESTR. Earlier, European Central Bank President Christine Lagarde said the institution she leads could launch a digital currency by the middle of this decade.

The EIB's digital bond sales based on the Ethereum network are overseen by investment banks Goldman Sachs, Santander and Societe Generale. Bloomberg previously published a report on the bank's regulatory arrangements on April 13. Both Santander and Societe Generale have previously issued bonds on the public Ethereum blockchain. The latter issued a larger bond, a €100 million covered bond issued in a security token model, which was rated AAA by Moody's and Fitch.

Digital bond issuance is not new to Europe. Automaker Daimler AG took the lead in using blockchain to sell 100 million euros ($119 million) in bonds in 2017. On April 24, 2019, Societe Generale issued 100 million euros ($112 million) of covered bonds on the public Ethereum blockchain through its subsidiary Societe Generale SFH as a security token. The bonds were rated AAA by Moody's and Fitch and were fully subscribed by Societe Generale. In other words, this was a pilot internal group transaction project. Telefonica SA's German division also used blockchain to raise a 200 million euro loan in early January this year.

Some bond issuers in other countries around the world, including the United Nations World Bank, China Construction Bank Corporation, JPMorgan Chase and several large banks including the National Bank of Canada, have also been experimenting with issuing digital bonds based on blockchain in the past few years, but this model has not yet become mainstream in the debt market.