Bank of Communications (BoCom) Hong Kong is set to issue a $300 million unsecured floating rate digital bond with a three-year term. This bond may be the first digital bond from a Chinese bank, as BoCom is the Hong Kong branch of a state-owned Chinese bank. The bond issuance utilizes the HSBC Orion digital asset platform and is cleared through the Central Moneymarkets Unit (CMU), the central securities depository in Hong Kong.
Moody’s has assigned a preliminary A2 rating to this bond, which is consistent with similar conventional bonds and BoCom’s long-term deposit rating. This rating is notable despite Moody’s negative outlook on China’s sovereign rating. The bond is classified as an unconditional, unsubordinated, and unsecured obligation of BoCom.
Moody’s believes that specific risks associated with blockchain technology have been addressed. The HSBC Orion platform operates on a privately permissioned blockchain, and cash transactions occur off-chain for both initial settlements and coupon payments.
This setup ensures that payments are not affected by any potential platform outages. Additionally, there are robust business continuity measures in place, and the CMU maintains an off-chain backup record of beneficial owners, which serves as the official legal record.
The HSBC Orion platform has a proven track record, having been used for several notable bond issuances, including a $756 million four-currency sovereign green bond for Hong Kong issued nearly a year ago. After a slow start with only two issuances in the first 13 months, activity increased significantly, with four bonds issued in the last five months.
Last year in November 2024, the European Investment Bank (EIB) has launched its fifth digital bond, valued at €100 million. This bond will be settled tomorrow using the pilot Euro wholesale central bank digital currency (wCBDC). This issuance is part of the European Central Bank’s trials for wholesale distributed ledger technology (DLT) settlements, which are set to conclude this month.
The Banque de France uses the term “exploratory cash tokens” for the tokens created on its DL3S DLT platform, instead of wCBDC.
