Within the European Union, the Republic of Slovenia has issued a 30 million-euro ($32.5 million) sovereign digital bond. The bond was settled on July 25, 2024, through the Bank of France’s tokenized cash system as part of the European Central Bank‘s (ECB) money settlement experimentation program.
ECB’s Experimentation with Wholesale CBDC
This landmark issuance is part of a broader effort by the ECB to explore the potential of wholesale central bank digital currency (CBDC) to enhance transparency and efficiency in financial markets. The four-month notes, which mature on November 25, 2024, carry a coupon rate of 3.65%. Settlement of the bond took place using wholesale CBDC, a digital token designed for financial institutions rather than individual consumers.
First Successful Test in Austria
The ECB has been actively testing the settlement of wholesale CBDC, with its first experiment conducted by Austria’s central bank in May 2024. This initial test involved the tokenization and simulated delivery-versus-payment settlement of government bonds in a secondary market transaction against central bank money.
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The Slovenian government stated that these initial transactions and experiments with wholesale tokenized central bank money are a crucial step toward greater transparency and efficiency in financial markets, promoting wider technology adoption. Although the financial value of such transactions is currently modest, the government expects the importance of distributed ledger technology to grow significantly in the coming years.
Role of BNP Paribas in the Digital Bond Issuance
BNP Paribas played a central role in this issuance, acting as the global coordinator and sole bookrunner. The bank also operated the distributed ledger technology platform, Neobonds, which was used to issue the digital bond. Neobonds is BNP Paribas’ private tokenization platform built with Digital Asset’s Daml and leveraging the Canton blockchain.
BNP Paribas’ Commitment to Financial Innovation
The issuance and settlement of Slovenia’s digital bond underscore BNP Paribas’ commitment to pioneering the use of tokenization in wholesale capital markets. Frederic Zorzi, Global Head of Primary Markets at BNP Paribas CIB, stated,
“BNP Paribas is committed to contributing to the Eurosystem-led wholesale digital settlement solutions that will make bond settlement more efficient and secure.”
The bank plans to continue participating in further real transactions and experiments as part of the ECB’s program to gain a deep understanding of the various wholesale CBDC settlement solutions offered by the Banque de France, Deutsche Bundesbank, and Banca d’Italia.
