China's Biggest Bank Pulls Massive Blockchain-Backed Bond Issue As Defaults Build

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by Tyler Durden
Monday, Nov 16, 2020 - 07:10 PM

With liquidity shortfalls mounting and defaults starting to accelerate, the already-opaque Chinese corporate bond market has hit a wall as the unexpected default of a Chinese coal miner has prompted particular concern over the health of these firms and their lenders, triggering a selloff in bonds issued by weaker borrowers from the sector and prompting some of them to cancel debt sales.

The most notable so far is that the listing of China Construction Bank’s blockchain-based debt issuance bonds has been delayed “at the request of the issuer” until further notice, according to a Nov. 13 statement from the Fusang exchange where they were due to be traded.

As CoinTelegraph's Jack Martin reports, it is not currently clear when or if China Construction bank's debt issuance sale will be rescheduled.

A block-explorer scan of the smart-contract address associated with the sale shows no transactions, suggesting that the sale and issuance of the bonds has also been delayed.

As Cointelegraph reported just last week, CCB is the second-largest bank in the world in terms of assets held.

image courtesy of CoinTelegraph

It planned to raise up to $3 billion in total through the bond issuance, with an initial tranche of $58 million due to launch for live trading on Nov. 13.

The bonds were set to be issued as digital assets on the Ethereum blockchain through an offshore branch of CCB on the small island of Labuan, Malaysia, which has a reputation as a tax haven.

The digital tokens were to sell at a face value of $100 each, enabling both institutions and private investors to take part in the sale.

The innovation is that these bonds are being used as tokenized certificates of deposit on the blockchain, which supports the issuance of such small-sum bonds; non-blockchain-based bonds are typically sold at higher minimums, and are therefore limited to professional investors or other banks.

The Fusang exchange, where the bonds were due to be traded, is also regulated in Labuan, and supports cryptocurrency trading, meaning that investors could have exchanged Bitcoin (BTC) for dollars in order to take part in the sale.

It is unknown at this stage when or if the sale will be rescheduled.