Slovenia issues inaugural digital bond in EU via BNP Paribas

Slovenia launched a $30 million digital bond at the tail end of July, joining an exclusive group of nations that rolled out their versions of the assets.

The issuance is the first sovereign digital bond in the EU and could set further issuances in the coming months. Operating as a short-dated digital bond, Slovenia’s government tapped BNP Paribas (NASDAQ: BNPQF) for issuance with the bank, providing book-running and coordinating services.

Digital bonds operate like traditional bonds but rely on blockchain technology for issuance, trading, management and security.

Slovenia’s digital bond will be issued on BNP Paribas Neobonds, a private tokenization platform with real industry experience in bond issuance and trading. Slovenian authorities reportedly leaned on Neobonds for its ability to generate coupons and support for secondary trading.

“The issuance and placement of the first Eurozone Sovereign Digital bond marks a significant milestone in the financial industry, and we are extremely happy to contribute to this innovative step forward,” said BNP Paribas executive Robinson Rouchié. “Our participation underscores our commitment to embracing new technologies and pioneering change within the asset management sector.”

The bonds will offer an interest rate of 3.65% and have a final maturity set for November, distinguishing them from other digital bond issuances with a one-year duration. Slovenia turned to British multinational law firm Clifford Chance for legal advice in the rollout of the sovereign bond.

Settlement for the digital bonds will be processed through Banque de France’s wholesale central bank digital currency (CBDC) offering, in line with the European Central Bank’s (ECB) pilot. BNP Paribas is currently participating in tokenization experiments by the central banks of France, Italy and Germany, pledging to improve and refine the scope of the offerings while hinting at new issuances.

“BNP Paribas is committed to contributing to the Eurosystem-led wholesale digital settlement solutions that will make bond settlement more efficient and secure,” read a statement. “We look forward to issuing more digital bonds with respective central bank solutions.”

A wave of digital bonds in Europe

While Southeast Asia appears to be inching forward with digital bonds, Europe is becoming a hotspot for the offering. Since 2022, an increasing number of banks and municipal governments have launched digital bonds with values reaching nearly $20 billion and show no sign of slowing down.

Germany’s KfW Bank joined the foray with a $4 billion issuance, while DekaBank threw its hat in the ring with a rollout of its own. The Swiss Cantons of Lugano, Basel and Zurich have since launched their digital bonds, relying on CBDCs for settlement in an impressive push for their adoption.

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