Slovenia has become the first European Union member to issue a sovereign digital bond, valued at 30 million euros ($32.5 million), utilizing the Bank of France’s tokenized cash system. This initiative is part of the European Central Bank’s (ECB) experimentation with money settlement using blockchain technology. The bond, coordinated by BNP Paribas, features a four-month maturity period ending on November 25 and offers a coupon rate of 3.65%.
The settlement process was conducted using wholesale central bank digital currency (CBDC), a type of digital token intended for financial institutions rather than individual consumers. The Slovenian government announced that the settlement took place on a Thursday. Earlier, in May, the ECB successfully completed its first test involving the settlement of a wholesale CBDC and has since planned additional trials and experiments. The inaugural experiment, conducted by Austria’s central bank, focused on tokenization and simulated delivery-versus-payment settlement of government bonds in a secondary market transaction using central bank money.
The Slovenian government highlighted the significance of these initial transactions and experiments with wholesale tokenized central bank money. They see these steps as crucial for enhancing transparency and efficiency in financial markets and promoting wider adoption of advanced technology. Although the current financial impact in terms of value issued or traded is minimal, Slovenia anticipates a substantial increase in the importance of distributed ledger technology in the coming years.
BNP Paribas played a pivotal role in this project, acting as the global coordinator and sole bookrunner. Additionally, BNP Paribas operated the distributed ledger technology platform Neobonds, which is their private tokenization platform. Neobonds was developed using Digital Asset’s Daml and leverages the Canton blockchain.
In summary, Slovenia’s pioneering issuance of a sovereign digital bond represents a significant milestone in the EU’s financial innovation journey. Through the collaborative efforts of the Bank of France, the ECB, and BNP Paribas, this venture marks a foundational step towards integrating blockchain technology into mainstream financial markets, promising greater efficiency and transparency in future financial operations. This effort underscores a transformative shift towards a more digitized financial infrastructure within the European Union.
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