The Inter-American Development Bank (IADB) issued digital bonds on 18 March 2025, marking its second supranational digital bond issuance and the first under Luxembourg law. This issuance, which was facilitated by HSBC Orion’s distributed ledger technology (DLT) tokenisation platform, highlights the growing trend of digital bond issuances. The bonds were governed by Luxembourg law, with A&O Shearman advising the joint lead managers and HSBC Orion on the transaction.
The issuance of digital bonds reflects the increasing confidence of multilateral development banks (MDBs) in the use of innovative financial instruments to raise capital. As an MDB, IADB supports economic and social development in developing countries while also playing a significant role in international capital markets. These banks raise substantial funds to finance loans to countries in need, with digital bonds becoming an increasingly prominent tool for such financing.
The transaction was carried out using HSBC Orion, a digital asset platform developed by HSBC. This platform aligns with the two-tier account structure mandated by the Luxembourg DLT regime, with HSBC serving as the central account keeper and custodian. HSBC Orion’s use in this transaction builds on its track record of facilitating digital bond issuances, reinforcing Luxembourg’s role as a hub for digital financial instruments.
This deal was led from Luxembourg by A&O Shearman partner and counsel Philippe Noeltner, with support from juriste Roman Mazhorov. Mausen commented that this deal sets a precedent for future supranational bond issuances under Luxembourg law, underscoring the importance of Luxembourg’s legal framework in supporting innovative financial instruments. Mausen highlighted that the transaction reflected the growing trust of MDBs in digital technologies to advance global economic development.
Noeltner added that this transaction exemplified the trust MDBs place in the transformative power of DLT technology to enhance transparency, efficiency, and security in financial markets. He further emphasised that Europe, particularly Luxembourg, has been at the forefront of developing a clear regulatory framework for digital bonds, which is expected to continue driving market development.