Blockchain
CDP issues digital bond on Polygon blockchain using new Italian law – Ledger Insights
Cassa Depositi e Prestiti Spa (CDP) issued a €25 million digital bond on the public Polygon blockchain, which was subscribed by Intesa Sanpaolo as the sole investor. The issue is part of the European Central Bank’s programme (ECB) Wholesale DLT settlement evidence. Then, the payment was made in central bank money using the Bank of Italy’s TIPS Hash Link solution, which provides connectivity between a DLT and the TARGET2 system for wholesale payments.
CDP is a development bank whose majority is owned by the Ministry of Economy and Finance.
Settlement of a blockchain-based government bond issue with central bank money was not the only innovative aspect of the digital bond. It is also the first to use the Italian law “Fintech decree”. This was the enactment by Italy of the DLT pilot schemebut it also applies to DLT issuances that are not part of the Pilot Regime (like this one), provided they take some additional steps. There must be a Digital Registry operated by a Digital Registry Manager authorised by Consob, the securities regulator in Italy. The Registry is a register of the real names and details of the owners of the securities.
“This transaction represents a significant step for CDP in capital market innovation through the pioneering adoption of blockchain technology for bond issuances,” said Fabio Massoli, Director of Administration, Finance, Control and Sustainability at CDP.
“The promotion of a new market ecosystem and the implementation of an innovative, efficient and secure market infrastructure will provide added value to both issuers and investors, opening up new opportunities for other actors, including SMEs.”
Fintech Decree Digital Registers
The Digital Registry is similar to the German eWpG. In both cases it supports direct issuance and transactions of securities without requiring central securities depositories (CSDs) or bank intermediaries. However, we believe that Italy may have gone a step further by allowing issuers to be the Digital Registry Manager for their own securities. This is the case here: CDP was the Market DLT Operator and also the Digital Registry Manager authorized by Consob. But we believe this also applies when the issuer/manager is not a bank.
“We are particularly pleased to have been the first in Italy, together with CDP, to carry out an operation that aims to be the point of reference for future issuers in a completely new legislative and regulatory framework,” said Massimo Mocio, Deputy Chief and Head of Global Banking & Markets, IMI CIB Division of Intesa Sanpaolo.
A key objective of the ECB’s wholesale settlement trials is to test interoperability between DLT networks and central bank money, both conventional and CBDC. Thus, transactions involve delivery versus payment in most cases. However, CDP said that settlement for its digital bond occurred “on the same day.”
Meanwhile, the digital bond has a maturity of four months. It has been rated A-2 by S&P, F-2 by Fitch and S-2 by Scope.