Chinese State-Owned Bank Stops Digital Bond Sale That Was Drawing Scrutiny
November 23 2020 - 1:32AM
Dow Jones News
By Serena Ng
One of China's largest banks halted the planned debut of a
digital bond on an exchange outside the country, shortly before the
security was scheduled to begin trading on Nov. 13.
China Construction Bank Corp. decided not to proceed with a sale
of up to $3 billion in short-term debt in Labuan, an offshore
financial center in Malaysia, after the bank's role in the deal and
the way investors could trade the securities came under scrutiny in
China.
The blockchain-based bond, the first of its kind, was supposed
to be listed on the Fusang Exchange, a bourse for digital
securities. The exchange said earlier this month that large and
small investors could buy the bond for as little as $100 by paying
the exchange cash or bitcoin.
Under the earlier plan, funds raised from the bond sale, which
would all be in U.S. dollars, would be deposited at the Labuan
branch of China Construction Bank. Bondholders would earn
annualized interest of Libor plus 50 basis points, or about 0.75%,
significantly above most short-term rates on bank deposits.
The Fusang exchange said Monday that it was notified by a unit
of China Construction Bank that the listing plan has been
withdrawn. A branch of the Chinese state-owned bank was the lead
arranger and listing sponsor of the bond, which would have been
issued by a special-purpose vehicle.
The planned bond sale, which was reported earlier this month,
created some controversy in China because of its association with
cryptocurrencies.
Three years ago, Chinese authorities banned bitcoin exchanges in
the country and fundraising via cryptocurrencies, to curb
speculation in the asset class and prevent cryptocurrencies from
being used for illegal activities or as a way to move money out of
the country.
The price of bitcoin has soared more than 40% over the past
month, and recently traded above $18,500, according to
CoinDesk.
Before the digital-bond sale was suspended, a representative of
China Construction Bank said the bank wasn't dealing in bitcoin and
would be receiving funds only in U.S. dollars. He didn't respond to
a request for comment on Monday.
A prospectus for the bond sale said the Covid-19 pandemic has
accelerated China Construction Bank's push into online financial
services such as microlending. The bank, which has hundreds of
millions of individual and business customers, also listed
inclusive finance and financial technology among its
strategies.
Henry Chong, Fusang's chief executive, said that before the
deal's suspension, the exchange saw "overwhelming investor interest
and demand" for the bond and had received inquiries from potential
bond issuers, including other banks in the region.
"We are frankly disappointed at the outcome, but we know the
model works, " Mr. Chong added. Investors who committed funds to
the new digital bond will get their money back, the exchange
said.
Zhou Wei contributed to this article.
Write to Serena Ng at serena.ng@wsj.com
(END) Dow Jones Newswires
November 23, 2020 01:17 ET (06:17 GMT)
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