China Construction Bank Withdraws from Digital Bond Issuance Due to “Over-excitement” in Cryptocurrency Circles

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One of China’s big six state-owned banks has withdrawn from plans to issue digital bonds in collaboration with a digital assets exchange in Malaysia following false reports that it would be accepting Bitcoins directly for transactions.

The Labuan-based Fusang Exchange announced on 23 November that the China Construction Bank (CCB) Labuan branch had opted to withdraw from its original plans to act as lead arranger for the first publicly listed debt security on a blockchain.

Fusang previously announced on 11 November that CCB Labuan would act as the lead arranger and listing sponsor for the Longbond SR Notes (“LBFEB21”) issued by Longbond Ltd., a securitisation Special Purpose Vehicle (“SPV”) set up with the sole purpose of issuing digital bonds and depositing the proceeds with CCB Labuan.

According to Fusang the bond is the first digital security to be listed on a public stock exchange that is directly accessible by retail investors, and provides bank-secured deposits at an annualised rate of LIBOR +50bps (~0.70%), considerably higher than market interest rates for typical fixed deposits.

A key selling point of the Longbond would have been the ability to trade the instruments on the Fusang Exchange in US dollars and Bitcoins prior to maturation, with a total program target size of USD$3 billion.

This feature led to reports that CCB would directly accept Bitcoins in exchange for bonds, prompting the lender to issue a prompt denial on 12 November.

Li Lianxuan (李炼炫), chief researcher with the OK Yunlian Research Institute (欧科云链), said to Cailianshe that CCB’s decision to withdraw from the deal was likely motivated by an “excessively excited” market reaction.

“Although CCB announced that it was not accepting Bitcoin transactions, market attention focused on the [idea] that CCB was issuing blockchain bonds that could be purchased using Bitcoins,” said Li.

“If the issuance had proved a success, this would have only made cryptocurrency circles even more excited.”

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