March 27, 2024
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European Investment Bank Issues First-Ever Blockchain Bond with Environmental Incentives

The European Investment Bank (EIB) has introduced a digital bond utilizing blockchain technology and environmentally-incentivized node infrastructure.

In an announcement, the EIB outlined the details of a ‘digital native green bond’ denominated in Swedish krona. The bond, worth 1 billion kr, offers institutional investors a fixed rate of 3.638% over a two-year period.

This Climate Awareness Bond is being hailed as the first blockchain-based bond to be listed on the Luxembourg Stock Exchange Securities Official List and showcased on the Luxembourg Green Exchange.

The bond will operate on a recently launched sustainable blockchain digital bond platform called So|bond. The platform enables the issuance, trading, and settlement of digital bonds while incorporating pro-environmental incentives for its node operators.

So|bond’s Proof of Climate Awareness protocol encourages nodes to minimize the environmental impact of their infrastructure. It achieves this by providing compensation to nodes based on a formula tied to their climate impact, where lower impact ratings result in higher rewards.

The protocol was developed by French-based IT provider Finaxys, while the operation of So|bond itself is a collaborative effort between Skandinaviska Enskilda Banken (SEB) and Credit Agricole CIB.

According to EIB Vice President Ricardo Mourinho Felix, the inaugural green bond denominated in SEK aims to leverage blockchain technology to advance more sustainable financial systems. He stated, “This Climate Awareness bond will run on a platform designed to minimize the environmental footprint of the IT infrastructure.”

Ben Powell, Head of Sustainable DCM at SEB, noted that blockchain technology adoption has been hindered by concerns about its high energy consumption in recent years. So|bond seeks to address the environmental impact of financial infrastructure by utilizing technology that has previously faced criticism for its carbon footprint. Powell added, “The platform we have built aims to address this by introducing a disclosure of the environmental footprint of the operators of the network.”

Over the past three years, the EIB has been exploring the use of blockchain-based platforms for digital bonds. The news of a possible Ethereum-based digital bond issued by the EIB led to all-time highs for ETH in April 2021.

Additionally, the institution successfully settled a 100 million euro ($103.7 million) digital bond denominated in euros on a private blockchain platform in collaboration with Goldman Sachs and Société Générale Luxembourg.

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