FINANCE - MARKETS

Distributed ledger technology

New blockchain bond lands on Luxembourg Stock Exchange



The Luxembourg Stock Exchange is admitting the first euro-denominated bond to use private blockchain technology under Luxembourg law. Library photo: Romain Gamba/Maison Moderne

The Luxembourg Stock Exchange is admitting the first euro-denominated bond to use private blockchain technology under Luxembourg law. Library photo: Romain Gamba/Maison Moderne

Efforts to create a welcoming legal framework for DLT in Luxembourg have paid off with the first digital bond under Luxembourg law placed on the Luxembourg Stock Exchange.

The Luxembourg Stock Exchange is admitting its first digital bond executed under Luxembourg law to its securities list as part of the grand duchy’s ongoing efforts to position itself as the preferred jurisdiction in which distributed ledger technology actors choose to structure their transactions.

The €100m, two-year bond is issued by the Luxembourg-headquartered multilateral lender European Investment Bank and is the first euro-denominated digital bond to use private blockchain technology.

“The transaction paves the way for future on-chain derivative solutions, by using the first interest rate swap hedge represented through the industry developed common domain model,” said partner at Allen & Overy Philippe Noeltner, who advised the bond’s bank consortium.

The bond is the latest reflection of Luxembourg’s efforts to create a flexible legal regime for DLT transactions. The Blockchain II Act 2021 enabled the issuance of dematerialised securities directly in DLT and opened the central account keeper role to record and operate DLT issuances of unlisted debt securities to any EU credit institutions or investment firms. 

Banks Goldman Sachs Europe, Santander and Societe Generale acted as joint lead managers on the deal, with Goldman Sachs and Societe Generale also acting as on-chain custodians, while same-day settlement is carried out by central banks Banque de France and Banque Centrale du Luxembourg.

The Luxembourg arm of international law firm Allen & Overy advised the bank consortium on the deal, while law firm Clifford Chance advised the EIB.