China Construction Bank to Tokenize $3 Billion Worth of Certificate of Deposit Via Blockchain
One of the major state-owned Chinese banks, China Construction Bank, is set to issue around $3 billion worth of certificate of deposits on the blockchain. These are debt instruments that have long been issued in traditional markets as ‘small term’ bonds. However, access to these particular instruments is mostly limited to institutions and medium-sized firms that can afford to fork out tens of thousands to participate in the debt market.
According to the South China Morning Post, which first reported the news, this milestone will mark the first digital security issuance on a Chinese bank's blockchain. The bank has partnered with Fusang, a Fintech firm based in Labuan, to facilitate the tokenization of its debt instruments and exchange the same using the U.S dollar or Bitcoin.
Unlike traditional markets where investors need heavy pockets, this particular initiative accommodates retail prospects, given that tokenized certificate of deposits will go for as low as $100. With the duration set at three months, these debt instruments are expected to yield investors 0.75% compared to a mere 0.25% interest rates offered by local banks.
Notably, China Construction Bank will issue its digital certificates through the entities branch based in Labuan, Malaysia. This is the same jurisdiction under which Fusang exchange is registered and regulated by the local financial authorities. According to Fusang’s CEO, Henry Chong, the exchange is hopeful of working with the Chinese controlled state bank to introduce more currency issue options such as the yuan.
To kick off the debt issuance, China Construction Bank will first roll out a $58 million public subscription for its digital deposit certificates. However, interested prospects ought to be keen that this arrangement will be guided by regulations that govern the Fusang exchange. This means that the debt instruments will not be covered by Chinese financial authorities, including the country’s deposit insurance body.
Felix Feng Qi, the principal officer of China’s Construction Bank Labuan branch, termed this development as a bridge between Fintech and traditional markets,
“Narrow the divide between fintech and the wider financial markets.”