China Blockchain Bond Blowup | Global Finance Magazine

Investors remain unclear as to the precise role of CCB in the blockchain bond.


What was billed as the first publicly listed debt security on a blockchain and tokenized on the Ethereum network abruptly ended in confusion after China Construction Bank (CCB) denied it was the issuer of a $3 billion blockchain bond. The planned listing was withdrawn following a decision by Fusang, a Malaysian digital securities exchange, to postpone the issue.


Investors remain unclear as to the precise role of CCB in the blockchain bond after reports emerged in November claiming Fusang partnered with the Labuan, Malaysia branch of CCB on the deal. Labuan is an offshore tax haven.


But in a disclosure, CCB, the world’s second largest bank by market capitalization, denied direct involvement or any links to cryptocurrencies, including Bitcoin. In a statement published on the bank’s Malaysian website, CCB said its role in the transaction was limited to that of “Lead Arranger, Listing Advisor of the bond, and the Facility Agent to facilitate clearing and settlement of the bond in USDs.


According to Fusang the issuer is a company named Longbond, a special purpose vehicle set up with the sole purpose of issuing digital bonds and depositing the proceeds with CCB Labuan. The bond would have given investors access to bank-secured deposits at an annualized rate of Libor +50 basis points and was scheduled to be traded on the Fusang exchange in dollars or Bitcoin.


It is not clear how Longbond’s ownership is structured or whether it has any fiduciary relationship with CCB. Some analysts say CCB’s rushed statement might indicate lingering concerns over Beijing’s earlier crackdown on cryptocurrencies and the launch of China’s digital yuan.


According to Valentin Preobrazhenskiy, chief executive of the LATOKEN, CCB’s move was unusual. “It was a surprise a state-affiliated bank pioneered the digital-assets market with a $3 billion transborder offering. State companies normally need a consensus of a majority of the political elite.”