China’s CCB drops digital bond plans on bitcoin fears
The last-minute decision by a unit of China Construction Bank to cancel a trailblazing digital bond sale on a virtual exchange in a Malaysian island tax haven appears connected to a Chinese clampdown in the wake of the axing of Ant Group’s IPO.
Repercussions from China’s move to hit big fintech where it hurts appear to have only just begun.
On November 13, a branch of China Construction Bank (CCB) in the Malaysian offshore financial centre of Labuan, cancelled a $3 billion print of digital bonds, minutes before they were set to go live on the virtual Fusang Exchange.
Radio silence ensued for eight days, before Fusang issued a statement saying that CCB, the world’s second-largest lender by assets, had “decided not to proceed” with the plan.
It added: “The exchange has accepted this decision, and is announcing the suspension of the listing with immediate effect,” noting that it had “initiated the return of all investors’ funds”.
CCB’s pioneering fundraising plan piqued the interest of investors, digital pioneers and, for all the wrong reasons, China’s watchful regulators.
It was an interesting deal from the start. The bank’s Labuan branch was the sole arranger and listing sponsor of the digital notes, which it wrapped inside a special-purpose vehicle it called Longbond.
The ultra-short-term bonds, which would have paid investors an annualized rate of 0.7%, were set to mature in February 2021.
The Chinese public [might] think CCB accepts bitcoin, which is against the law
Investors appeared to have had no misgivings about the blockchain-based bonds.