China Construction Bank Corp. is planning to raise up to $3 billion from a sale of bonds that individuals and institutions can trade in and out of using U.S. dollars or bitcoin.
The Beijing-headquartered bank, one of China’s largest, is selling a digital bond that investors outside the country can buy for as little as $100. The security would roll over every three months and pay annualized interest of Libor plus 50 basis points, or approximately 0.75%.
The deal is being arranged by a branch of China Construction Bank located in Labuan, a small offshore financial center in Malaysia that is a tax haven. The digital bond will be listed on the Fusang Exchange, a bourse that also facilitates the trading of cryptocurrencies.
The exchange accepts bitcoin as a form of payment, and will convert it into U.S. dollars for investors buying the digital bonds. Investors can only purchase the bonds via the exchange, which charges a small fee for trades.
Felix Feng Qi, chief executive of China Construction Bank’s onshore Malaysia business and principal officer of its offshore Labuan branch, said in a statement the bond is “the first publicly listed debt security on a blockchain.” Proceeds from it would be deposited at the branch of the Chinese state-owned lender.
Henry Chong, Fusang’s CEO, said the bond is essentially like a three-month fixed deposit product that pays holders much more than most U.S. dollar bank-deposit rates. The securities can be purchased by investors all over the world, with the exception of tax residents of the U.S. and China, and people and entities in Iran and North Korea.
“From our perspective, we are taking bank deposits, which is our core business,” said Steven Wong, the chief operating and financial strategist for China Construction Bank (Malaysia). He said the bank considers this a pilot and an innovative offering. “The bank is not dealing in bitcoin or cryptocurrencies,” he added.
The offering started on Wednesday, and trading of the new digital security will begin on Nov. 13, according to the exchange.
Culled from Wall Street Journal