Digital Euro

EIB settles €100 million digital bond on private blockchain

“Unlike some cryptocurrencies using blockchain technology, the EIB’s blockchain bond issues do not lead to extensive energy use,” the bank wrote.

According to a new press release on Nov. 29, the European Investment Bank, or EIB, issued a first-ever euro-denominated €100 million digital bond on a private blockchain-underpinned platform with tokenization help from Goldman Sachs.

The latter, along with Société Générale Luxembourg, also act as the on-chain custodians for the financial instrument. The bond bears interest at a coupon rate of 2.57% per year with a maturity date of Nov. 29, 2024, and is governed by Luxembourger laws. 

Banque de France and the Banque Centrale du Luxembourg participated in the project to provide a digital representation of euro central bank money. The EIB says that “the transaction paves the way for future on-chain derivative solutions, by using the first interest rate swap hedge represented through the industry-developed common domain model.”

In addition, the bond represents the “first cross-chain Delivery vs. Payment (DVP) settlement using an experimental CBDC [Central Bank Digital Currency] token.”

Last April, the EIB successfully issued the first digital euro bond on a public blockchain. Goldman Sachs, Banco Santander, and Société Générale led the sale of the two-year €100 million digital bond. Regarding today’s novel digital bond issuance on a private blockchain, Ricardo Mourinho Félix, EIB’s Vice President, commented: 

“Blockchain has the potential to disrupt a wide range of sectors. It plays a central role in the success of Europe’s green and digital transitions, and strengthens our technological sovereignty. Innovation is part of the EIB’s identity and issuing this fully digital bond is another important step in helping to develop a fully digital ecosystem.”

Bank of Finland governor says digital euro could facilitate pan-European services to consumers

“An economy dominated by digital payments but without a strong monetary anchor would be inherently unstable,” claimed Rehn.

In a novel address at the University of California Berkley published on Wednesday, Olli Rehn, governor of the Bank of Finland, touted the possibility of a digital euro centralized bank digital currency (CBDC) functioning in tandem with private fintech solutions to facilitate the cross-border payment of services across Europe.

The European Central Bank’s (ECB) investigation into the plausibility of the digital euro began in late 2021 and is scheduled to conclude in October 2023. Rehn outlined the utility of the experimental digital euro, stating: 

“A digital euro would give people an additional choice about how to pay and would make it easier to do so in an increasingly digital economy. It would expand the availability of digital central bank money beyond transactions between banks to include everyday peer-to-peer payments between people, covering online shopping as well as bricks and mortar businesses.”

Rehn argued out that privately developed cryptocurrencies are inherently unstable due to the lack of a monetary anchor. “Digitalization is making financial services more efficient but leaving them more vulnerable to cyber-attacks and other forms of cyber risks,” he said, pointing out that vulnerabilities such as money laundering, financial crime and other illicit activities represent solid reasons for the”safe and legal means of payment in the digital age via CBDCs.”

Earlier this month, the ECB identified CBDCs as the best method for cross-border payments compared to stablecoins and other cryptos. In the report, the ECB criticized the settlement times present in networks such as Bitcoin, saying that differences in value between transfer initiation and finalization make it suitable for large-sum transactions.