(Bloomberg) -- For the European Union’s investment arm, blockchain could prove a game-changer, bringing about a transformation of debt market processes with echoes of the revolution ushered in by the World Wide Web.

“The technology is revolutionary,” said Richard Teichmeister, head of funding at the European Investment Bank. “This is a bit like the development of the internet and someone just sent the first email.”

The EIB harnessed the power of blockchain earlier this week when it raised 100 million euros ($121 million) in a two-year deal that was the world’s first syndicated offering of “digital” bonds. According to Teichmeister, the digital-ledger technology brings benefits in terms of savings of time and money that market participants can no longer ignore.

Issuers including the World Bank, China Construction Bank Corp., JPMorgan Chase & Co. and National Bank of Canada have deployed blockchain in the debt capital markets in recent years, but, until now, its use has been comparatively limited.

The EIB took a different tack from previous issuers by syndicating the bonds via a group of banks. The bonds were bought by fewer than 10 investors unaffiliated with the issuer or the underwriters.

To carry out the deal, the EIB issued bond tokens registered on the public Ethereum blockchain network. Investors paid for the tokens using traditional fiat currency, while the issuer used Bank of France’s digital currency to settle the bond with the arrangers.

Digital Currency

The French central bank created the digital currency, rated 1:1 against the euro, solely for the purpose of the transaction. The principal will be repaid to investors in fiat currency form.

Goldman Sachs Group Inc., Banco Santander SA and Societe Generale SA handled the sale of the bonds. Some of the buyers joined the EIB in singing blockchain’s praises.

“Blockchain technology and the tokenization of bonds is a game-changer for the industry,” said Christoph Hock, head of multi-asset trading at Union Investment in Frankfurt, who participated in the issue. “The settlement and clearing process is significantly easier and more efficient.”

The technology’s appeal lies in way it can streamline complex processes.

For example, banks spend a lot of time on reconciliation, a procedure by which syndicate desks match orders and remove duplicates. With blockchain, this step gets removed.

“There is one source and everyone can see it,” said Xavier Leroy, a capital markets officer at the EIB who also worked on the digital bond. Leroy said that blockchain removes the burden on issuers of maintaining a back office to carry out deals just once or twice a year.

Deal Trailblazer

The EIB sees itself as a trailblazer. It was among the first to issue green and sustainability bonds, as well as debt benchmarked against a new euro short-term rate called ESTR.

The technology used for verifying and recording transactions that’s at the heart of cryptocurrencies has faced hurdles to wider adoption, and the pandemic has caused delays in some projects. In order to work, it requires standardization among all of its users, as well as supportive legislation.

EIB issued its digital bonds under French law because Luxembourg legislation, which the bank typically uses, wasn’t ready by the time it had to choose a jurisdiction.

Even so, growth in the use of blockchain is just beginning, said Teichmeister.

“We’ve reached a stage at which you can no longer dismiss it,” he said.

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