Goldman Sachs unveils digital asset platform with EIB €100m blockchain bond – Ledger Insights

Goldman Sachs has launched its digital asset tokenization platform, GS DAP, with the issuance of a €100 million ($104 million) digital bond for the European Investment Bank (EIB) on the private GS blockchain. This is the EIB’s second digital bond, and as with the previous bond, Goldman, Santander, Société Générale and Banque de France were involved.

The 2-year syndicated bond issue was settled immediately in a delivery versus payment transaction using experimental central bank digital currency (CBDC) tokens issued by the Banque de France. The bond and the CBDC tokens live on different blockchains.

Given that the bond is issued under Luxembourg law, the Banque centrale du Luxembourg was also involved in the bond settlement and the security is listed on the Luxembourg Stock Exchange. Luxembourg is one of the friendliest jurisdictions for digital securities in the EU, although France and Germany are also attractive. Next year the EU will start the DLT Pilot Regime which will enable a certain level of digital securities testing across the EU.

“Blockchain has the potential to disrupt a wide range of sectors. It plays a central role in the success of Europe’s green and digital transitions, strengthening our technological sovereignty,” said EIB Vice President Ricardo Mourinho Félix.

The main advantages of blockchain, in this case, are the ability to make decisions faster and operational efficiency. Lowering issuance costs can also make smaller offerings more viable. Apart from efficiency, when securities are tokenized, they also present new business opportunities.

Societe Generale Securities Services (SGSS) is the custodian on the chain with Goldman Sachs Bank Europe SE, Santander and Société Générale as joint managers. Investors included AXA IM and Union Investment, which also bought the EIB’s first digital bond issued in April 2021 on the public Ethereum blockchain.

Goldman Sachs Digital Assets

“With this new digital bond, the EIB is once again demonstrating its capital markets leadership, pushing innovation forward by pricing the first syndicated digital bond on a private permissioned chain and settling T+0 across two blockchain networks,” said Mathew McDermott, Global Head of Digital Assets at Goldman Sachs.

At a Financial Time conference this week, McDermott observed that the crypto boom has led many institutions to conduct due diligence. “Because the use case for investing wasn’t always intuitive,” McDermott said, “they spent time looking at the underlying technology, and that’s where the excitement started to grow.”

“Over the last 12 months there has been a huge amount of investment across the market in terms of thinking about how they can use it to either digitize the whole lifecycle of the business or just parts of what they do to improve resilience, reduce risk, increase efficiency.”

While he believes most institutions are comfortable with permissioned blockchains, as regulations provide more clarity, they will move toward public blockchains due to greater liquidity and a larger investor base.

The Goldman Sachs DAP platform was developed in conjunction with Digital Asset using their DAML smart contract language, with the collaboration announced just over a year ago. We have asked what permitted blockchain technology was used but did not receive a response in time for publication.

In this case, the EIB also executed an interest rate swap on the GS DAP platform, using the Common Domain Model, an ISDA standard for derivatives.

This blockchain bond is part of the EIB’s Project Venus which involves issuing a series of digital bonds.

Meanwhile, Goldman Sachs is also involved in crypto derivatives. “As a U.S. bank, the bank holding company cannot trade bearer assets, but we can trade derivatives,” McDermott said. “There has been a significant increase in interest in recent months as the market has deteriorated.”

Update: Comments from the FT conference were added