The AIIB issues its first digital native banknote on Euroclear’s D-IMF platform

The Asian Infrastructure Investment Bank (AIIB) has successfully issued its first Digital Native Note (DNN) on Euroclear’s Digital Infrastructure for Financial Markets (D-FMI). This is Euroclear’s first digital USD issuance. The initiative was supported by BMO Capital Markets as dealer and Citi, which acted as dealer and issuing and paying agent for the transaction.

The issuance, the first by an Asia-based issuer, was executed through Euroclear’s Digital Securities Issuance (D-SI) service, which enables fully digital issuance, distribution and settlement of international securities on Distributed Ledger Technology (DLT). DNN, which is rated triple-A by Moody’s, Standard & Poor’s and Fitch Ratings, successfully raised USD 300 million to support the AIIB’s Sustainable Development Bond Programme.

The bond is listed on the Luxembourg Stock Exchange. Citi acted as dealer, issuing and paying agent, BMO Capital Markets as dealer, and Euroclear Bank as central securities depositary for the issuer. Clearing of the bonds is also possible at the Central Money Markets Unit (CMU) of the Hong Kong Monetary Authority and the SIX Swiss Exchange (SIX). Clifford Chance advised the AIIB on the transaction, and A&O Shearman acted as intermediaries.

This issuance demonstrates how existing financial market infrastructure can be used to scale up the adoption of digital securities. In the AIIB’s fifth year as a bond issuer, this DNN issuance demonstrates that the AIIB is committed to innovation in capital markets and making settlements more efficient and faster.

Euroclear’s D-FMI platform is fully integrated into Euroclear’s traditional settlement system, ensuring access for investors and market makers.

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Philippe Laurensy, Managing Director and Head of Product, Strategy and Innovation, commented: “As we continue on our path to becoming a digital and data-driven Financial Markets Infrastructure, this issuance marks another important step forward. Together with our clients and the wider ecosystem, we will continue to invest in innovation and deliver robust technological solutions that can unlock new business opportunities and attract issuers and investors from around the world.”

AIIB Treasurer Domenico Nardelli said: “AIIB is proud to partner with Euroclear, Citi and BMO on this milestone transaction that represents many firsts. Not only is this the first USD banknote issued digitally on Euroclear’s D-IMF, but it is also the first time an Asia-based issuer has issued on the platform and the first DNN to be held on the HKMA CMU.”

“The success of this transaction demonstrates that Euroclear’s D-IMF enables easy and broad adoption of digital bonds at scale, where market participants can buy and sell the bonds within their existing account structures. As a multilateral development bank financing Infrastructure for Tomorrow and with innovation in its DNA, AIIB sees this as an important opportunity to participate in the digitalisation of capital markets and help connect Asia and the world,” he continued.

This issuance demonstrates how existing financial market infrastructure can be used to expand the adoption of digital securities.

Citi has supported the AIIB in previous transactions and this is the first time Citi has worked with the AIIB on the issuance of a digitally native note. Citi will continue to facilitate the issuance of digital bonds, unlocking the potential of digital assets for clients, including efficient access to capital, while paving the way for new operating models.

“This issuance of digitally native notes reflects the growing adoption of digital assets in financial markets. Citi is proud to be a key participant in this important benchmark. From execution and settlement to our work as issuing and paying agent, Citi’s functions leverage the power of the bank’s interconnected businesses to support clients throughout the entire lifecycle of key transactions. Citi will continue to facilitate the issuance of digital bonds, unlocking the potential of digital assets for clients, including efficient access to capital, while paving the way for new operating models,” said Richard Zogheb, Head of Global Debt Capital Markets at Citi.

“BMO Capital Markets was delighted to be involved in this landmark transaction for the AIIB, in collaboration with Citi and Euroclear. Digitalisation is high on the agendas of issuers, investors and banks as the financial sector strives to increase efficiency and resilience,” said Summer Hinton, Head of Global Markets International.

“Here at BMO, digital is our way of doing business and we are pleased to see Debt Capital Markets continue to evolve in innovative and scalable ways into the future.”