China Construction Bank (CCB) is the first Chinese financial institution to issue a blockchain-based security. Through tokenization, the major bank wants to make investments in bonds more accessible to private investors.
According to Forbes, the China Construction Bank (CCB) is the world’s second largest bank with a turnover of over 150 billion US dollars. According to the Wall Street Journal, the major bank announced this week that it will put USD 3 billion in bonds on the blockchain. The tokenization is intended to enable private investors from abroad to invest in their financial products.
Advantages of digital bonds
Traditionally, bonds are sold in the form of certificates of deposit at thousands of US dollars per unit. Thus, the traditional target audience mainly consists of professional investors or banks. The tokenization of these deposit certificates enables fractional buying and selling. This makes it possible for private investors to purchase smaller amounts of these digital bonds.
The certificates are issued via the China Construction Bank for a minimum amount of USD 100 and a term of three months. This is a fraction of the usual cost of bonds issued by the bank and provides an annual yield of 0.75% – compared to 0.25% annual interest rates in Chinese banks.
The transaction also enables international investors to trade the China Construction Bank (CCB) digital certificates with Bitcoin on the Fusang Exchange, a digital exchange licensed by the Financial Supervisory Authority in Malaysia.
Tokenization gains momentum
Just two weeks ago, the crypto exchange FTX announced that it would offer tokenized stocks on its platform. Such projects are important steps towards the digital trading of all assets. Especially for illiquid assets such as real estate, art or commodities the blockchain technology can open new worlds.
Due to the divisibility, global transferability and low transaction costs of so-called security tokens, smaller private investors also have access to traditional assets. Markets with historically low liquidity could thus enjoy a new inflow of investment.
“We think this is the perfect showcase of how digital securities can drive financial integration by combining the exciting advances in blockchain technology with the tokenization of traditional securities. We believe that this will be the beginning of a true institutionalization of digital asset products.” – Henry Chong, CEO Fusang