This is the first time that a Chinese bank has issued a digital security on the block chain.
This development will enable retail investors to buy the bank’s certificates of deposit via BTC.
The bank will issue the certificates of deposit for a minimum amount of £75.82.
The state-owned China Construction Bank has teamed up with Fusang Exchange, a Hong Kong-based FinTech company, to sell £2.28 billion of debt on the block chain. A report unveiled the news on November 11 and noted that this was the first time a Chinese bank had issued digital collateral on the block chain. The bank will allegedly sell the bond in the form of certificates of deposit.
According to the report, the bank typically sells each certificate of deposit in tens of thousands of yuan, and they primarily attract professional investors or other banks. The bonds are allegedly used for interbank financing, especially for small to medium-sized banks in the country. By converting the certificates of deposit into tokens on the block chain, the bank now enables small investors to buy digital certificates in relatively small quantities.
China Construction Bank revealed that it will issue the deposit certificates through its Labuan with a three-month maturity. Each certificate is reported to have a minimum amount of 75.82 pounds sterling and will yield a yield of approximately 0.75% at maturity. This percentage is significantly higher than the 0.25% interest per annum charged by banks.
Trading in bonds in BTC
According to the report, the deal will also allow investors to trade digital certificates issued by China Construction Bank in Bitcoin through the Fusang Exchange, which is licensed by the Financial Supervisory Authority in Labuan, Malaysia. In addition to trading the certificates in BTC, investors will also be able to use the US dollar. Trading is scheduled to begin on Friday, November 13.
If this transaction attracts many investors, Fusang intends to work with China Construction Bank to issue the certificates in other currencies, including yuan. To kick off the £2.28 billion program, the bank plans to issue £43.96 worth of digital certificates to the public. According to reports, China Construction Bank Corp. will lead the arranger.
The publication further stated that the program will be an offshore issuance of US dollars by the bank. As such, the Chinese deposit insurance does not cover the digital certificates.
Commenting on the development, Felix Feng Qi, China Construction Bank’s chief executive at the Labuan branch, said that the issue is an attempt to bridge the gap between the FinTech sector and the broader financial markets.