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Italy is a blockchain pioneer with a 25 million euro digital bond
Italy’s Cassa Depositi e Prestiti Spa (CDP) has made a significant leap in the financial sector by issuing a €25 million digital bond on the Polygon public blockchain. This issuance was underwritten exclusively by Intesa Sanpaolo, which acted as the sole investor. The initiative is part of the European Central Bank’s (ECB) wholesale Distributed Ledger Technology (DLT) settlement trials, where payments were settled in central bank money using Banca d’Italia’s TIPS Hash Link solution. This solution connects the DLT system and TARGET2 for wholesale payments.
CDP, a development bank primarily owned by the Italian Ministry of Economy and Finance, has taken an innovative step in capital markets by combining blockchain technology with traditional finance. This digital bond issuance not only represents a pioneering use of blockchain, but also marks a new era in bond issuance and settlement.
Implementation of the Italian law “Fintech Decree”
A notable aspect of this digital bond issuance is its alignment with the Italian “Fintech Decree” law. This law, the Italian version of the DLT Pilot Regime, allows DLT issuances outside of the Pilot Regime, provided that certain conditions are met. One of these conditions is the maintenance of a Digital Registry by a Digital Registry Manager authorized by Consob, the Italian securities regulator. This registry records the real names and details of the owners of the securities, ensuring transparency and security.
Fabio Massoli, Director of Administration, Finance, Control and Sustainability at CDP, indicated that this transaction represents an important step for CDP in capital market innovation. He highlighted the pioneering use of blockchain technology for bond issuances, highlighting the promotion of a new market ecosystem and the implementation of an innovative, efficient and secure market infrastructure. This, he noted, would provide added value to issuers and investors, creating new opportunities for various market players, including small and medium-sized enterprises (SMEs).
Comparison with the German eWpG law
The concept of Digital Registry in the Italian Fintech Decree has similarities with the German eWpG. Both frameworks support direct securities issuance and transactions without the need for central securities depositories (CSDs) or banking intermediaries. However, the Italian approach appears more advanced as it allows issuers to act as their own Digital Registry Managers. In this case, CDP has assumed the role of both DLT Market Operator and Digital Registry Manager authorised by Consob, demonstrating the flexibility and efficiency of the Italian regulatory framework.
Massimo Mocio, Deputy Chief and Head of Global Banking & Markets of the IMI CIB Division of Intesa Sanpaolo, expressed satisfaction at being the first in Italy, together with CDP, to carry out an operation destined to constitute a point of reference for future issuers in a new legislative and regulatory scenario.
ECB wholesale settlement processes
The ECB’s wholesale settlement trials aim to test the interoperability between DLT networks and central bank money, including both conventional currency and central bank digital currency (CBDC). Most transactions in these trials involve delivery versus payment, ensuring safe and efficient settlement processes. CDP noted that settlement for its digital bond was completed on the same day, reflecting the efficiency of the blockchain-based system.
Digital Bond Rating and Duration
The digital bond issued by CDP has a duration of four months and has received ratings from the main credit rating agencies. It has been rated A-2 by S&P, F-2 by Fitch and S-2 by Scope. These ratings indicate a high level of credit reliability, further strengthening the attractiveness of the bond for investors.
Through this digital bond issuance, CDP has demonstrated a forward-thinking approach, leveraging blockchain technology to improve the efficiency, security and accessibility of bond markets. This initiative not only positions Italy at the forefront of financial innovation, but also sets a precedent for other countries and institutions to follow. The successful integration of blockchain and central bank money in the bond issuance shows the potential of DLT in transforming traditional financial systems.