The Beijing-based Asian Infrastructure Investment Bank (AIIB) has issued its first digitally native note (DNN) using Euroclear’s Digital Financial Market Infrastructure (D-FMI). As with the first DLT-based D-FMI bond issuance from the World Bank, Citi acts is issuing and paying agent. It also takes on the role of dealer together with BMO Capital Markets.
The $300 million digital bond is part of the AIIB’s sustainable bond development program. Plus, this marks the D-FMI’s first dollar bond and first for an Asian client.
The bond is listed on the Luxembourg Stock Exhcange. Euroclear is the issuer and central securities depository (CSD) and the bond can also be cleared on the Hong Kong Monetary Authority’s Central Moneymarkets Unit (CMU) and SIX Swiss Exchange (SIX).
As previously noted, Euroclear integrated the Corda-based DLT infrastructure with its traditional settlement system, which means investors that haven’t yet embraced DLT can still invest. Hence, it avoids fragmentation and enhances the liquidity of the bond. The integration also ensures compliance with CSDR regulations.
“The success of this transaction proves Euroclear’s D-FMI allows for easy and broad adoption of digital bonds at scale where market participants can buy and sell the bonds within their existing account structures,” said 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.”
About the AIIB
The AIIB is less known than the Asian Development Bank (ADB) but far younger. With $100 billion in capital, the Beijing-based AIIB has an AAA rating. The two organizations sometimes work together with the AIIB committing $4.8 billion in loan co-financing for ADB projects during 2023.
China founded the AIIB in 2016 and has 26.54% of the votes. By ensuring the region controls 75% of the votes, some view this as China cementing its power. Membership of the AIIB includes 109 countries, including most of the major European nations and Canada. However, there are two significant absentees, the United States and Japan.
These are the two countries with the largest votes at the ADB – 12.75% each, whereas China has 5.44%. America views the AIIB as a Chinese foreign policy tool. In recent times, the AIIB has backed a few projects outside of the region, including in Africa, Latin America and Eastern Europe, which is seen as reinforcing the American view. The AIIB has an expansive definition of Asia encompassing the Middle East, including Turkey, Israel and Cyprus. Iran is a member.