AIIB Breaks Ground with First Blockchain-Backed Bond $300M Issuance

The Asian Infrastructure Investment Bank (AIIB) has taken a significant step towards the digitalization of capital markets with its inaugural $300 million bond issuance underpinned by blockchain technology.

However, the digitally native note (DNN) marks a key milestone for the AIIB and its commitment to fostering innovative financing solutions for infrastructure development.

The issuance, facilitated by Citigroup Inc. and BMO Capital Markets, leverages Euroclear’s Digital Financial Market Infrastructure (D-FMI), a blockchain-based platform designed to streamline bond issuance and settlement. The AAA-rated note offers a 4% coupon and matures in January 2027.

AIIB Bond Landmark Transactions Several Key Distinctions

The D-FMI’s first issuance of a dollar-denominated bond.
Moreover, the AIIB becomes the first Asian client to utilize the D-FMI platform for bond issuance.

The bond aligns with the AIIB’s sustainable bond development program, emphasizing its commitment to financing projects that promote environmental and social responsibility, according to the source.

Furthermore, the issuance boasts enhanced liquidity and accessibility, thanks to the integration of the Corda-based DLT infrastructure with Euroclear’s traditional settlement system.

Furthermore, the integration allows both DLT-enabled and traditional investors to participate in the bond market, mitigating fragmentation and ensuring compliance with CSDR regulations.

“The success of this transaction proves Euroclear’s D-FMI allows for easy and broad adoption of digital bonds at a scale where market participants can buy and sell the bonds within their existing account structures,” stated AIIB Treasurer, Domenico Nardelli.

“As a multilateral development bank financing ‘Infrastructure for Tomorrow’ and with innovation in its DNA, AIIB sees this as an important opportunity to participate in the digitization of capital markets and help connect Asia and the world.”

AIIB Rising Force in Infrastructure Finance

The AIIB, founded in 2016 with a capital base of $100 billion, has rapidly emerged as a major player in infrastructure financing. Its AAA rating reflects its financial strength and commitment to sustainable development. While less prominent than the Asian Development Bank (ADB), the AIIB has collaborated with the ADB on several projects, demonstrating its collaborative approach to regional development.

Notably, China, the founding member and largest shareholder with 26.54% of the voting power plays a significant role in the AIIB. However, the bank’s membership spans 109 countries, encompassing most major European nations and Canada.

Notably, the United States and Japan, the two countries with the largest voting shares at the ADB, are absent from the AIIB membership. The voting shares led some to perceive the AIIB as a tool for China to exert its influence, according to the source.