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China Construction Bank (CCB) has decided to pull a US$3 billion digital bond programme on a blockchain platform, getting cold feet on the eve of a market breakthrough, amid a clampdown on technology companies and their financial innovations.
The bank, the world's second-largest lender, "decided not to proceed" with the programme without offering an explanation, Fusang Exchange, a virtual stock exchange for digital initial offerings, said in a statement on Monday.
The Chinese lender's proposed digital bonds were halted from trading just before they were to go live at noon on November 13 on Fusang's virtual exchange, which is licensed by the Malaysian offshore financial authority in Labuan. About US$58 million worth of certificates of deposit were said to be issued in the first tranche.
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CCB's branch in Labuan was the lead arranger and listing sponsor of the digital security to be issued by a special purpose vehicle known as Longbond. The security would have matured in February 2021 and would have paid investors an annualised rate of 0.7 per cent, or Libor plus 50 basis points, higher than returns on the fixed deposit rate, according to a November 11 statement.
"The exchange has accepted this decision, and is announcing the suspension of the listing with immediate effect," Fusang said in the statement on Monday. "The exchange shall ensure an orderly withdrawal of all related listing processes and procedures, and has initiated the return of all investors' funds."
The withdrawal mirrors the troubles with Ant Group, when its record-breaking IPO was halted 48 hours before the stock's November 5 debut due to a "significant change" in its business environment. Ant has since refunded US$3 trillion to retail investors who applied for its shares in Shanghai and Hong Kong.
CCB's corporate communications officer in Beijing did not return phone calls or reply to text messages on Monday seeking comment on the withdrawal. CCB has notified the Labuan Financial Services Authority about the cancellation, according to Fusang's statement.
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Given that China's central bank is also rolling out its own sovereign digital currency, or digital yuan, speculation abounds. CCB's digital bonds, which can be bought and traded using US dollars or bitcoin, appear to undermine efforts to safeguard its currency sovereignty.