FAB, the largest bank in United Arab Emirates, to launch a digital bond on HSBC Orion. The bond will be traded on ADX.
In a groundbreaking move, First Abu Dhabi Bank (FAB) is set to issue the first digital bond in the Middle East via the HSBC Orion digital assets platform. This initiative, which expands access to institutional-grade digital instruments and lays the foundation for a broader class of tokenized assets, follows a series of successful digital bond issuances on HSBC Orion.
The three-year, $100 million bond is being priced at SOFR+70bps. Notably, FAB has a strong track record on blockchain, particularly in the payments sector, and participates in the mBridge cross-border CBDC platform, which involves the central banks of China, Hong Kong, Saudi Arabia, Thailand, and the UAE.
The bond issuance will utilise the Hong Kong platform, which is integrated with the Central Moneymarkets Unit (CMU), the local central securities depository (CSD). This integration benefits from existing CMU links with Clearstream and Euroclear, enabling global investors to buy in their usual manner or alternatively onboard onto HSBC Orion as a direct participant.
HSBC Orion operates multiple blockchain networks, one based in Luxembourg and the other in Hong Kong. The European Investment Bank (EIB) settled a €100 million digital bond using a wholesale CBDC on HSBC Orion last month, while the state of Luxembourg issued a digital treasury note through the platform just last week.
The key benefits of using digital bond platforms such as HSBC Orion compared to traditional bond platforms include significantly faster settlement times, operational efficiencies through automation, reduced counterparty risk, enhanced market accessibility and integration, improved transparency and security, support for a broader range of tokenized assets, and global coordination and compliance.
Digital bonds, unlike their traditional counterparts, can settle in as little as T+1 (next business day), reducing liquidity gaps and operational delays. They also leverage smart contracts on blockchain networks, automating processes that are manual and error-prone in traditional platforms, which lowers costs and reduces operational risk.
The use of distributed ledger technology (DLT) minimises reliance on intermediaries and manual reconciliations, thus mitigating counterparty risk. HSBC Orion integrates with established global post-trade infrastructures like Euroclear and Clearstream, allowing investors to participate via existing custodial relationships or direct onboarding, facilitating cross-border investment without friction.
The blockchain foundation provides transparent and immutable records of bond issuance, ownership, and transactions, enhancing investor confidence and security. Beyond traditional bonds, platforms like HSBC Orion enable tokenization of diverse instruments such as green bonds, sukuk, and real estate-linked products, paving the way for innovative asset classes in fixed income.
FAB was amongst the first foreign users of China's digital RMB, and the bank is the sole global coordinator, lead manager, and bookrunner on the transaction. The digital bond is currently at the pre-issuance pricing stage and will be listed on the Abu Dhabi Securities Exchange (ADX).
With HSBC Orion having been the most prolific digital bond platform over the past nine months, with at least seven issuances during that period, the future of fixed income investing appears to be increasingly digital.
- Leveraging its strong blockchain expertise, First Abu Dhabi Bank (FAB) is collaborating with HSBC Orion, a digital assets platform, to issue a three-year, $100 million digital bond with enhanced transparency and security.
- Notably, the bond issuance is beneficial for global investors as it integrates with the Central Moneymarkets Unit and local central securities depository, enabling seamless participation via existing custodial relationships or direct onboarding onto HSBC Orion.
- The technology used in digital bond platforms, such as HSBC Orion, offers numerous benefits, including significant settlement time reduction, operational efficiency through automation, lower costs, and expanded market accessibility for diverse tokenized assets like green bonds, sukuk, and real estate-linked products.
