Slovenia issues inaugural digital on-chain bond

Slovenia has issued a sovereign digital on-chain bond worth $32.5 million or 30 million euros, which is reportedly the first from a European Union (EU) country. The bond was issued on July 25 as part of an experimental project with the European Central Bank wholesale central bank money (CeBM) program.

The settlement took place in a wholesale central bank digital currency (CBDC). A wholesale CBDC is a digital token designed for use by financial institutions rather than consumers. According to The Defiant, BNP Paribas coordinated the bond, which was settled through the Bank of France’s tokenized cash solution.

Slovenia commits to using digital assets

The bond will attract an interest rate of 3.65% and has set a final maturity rate for November 25. The issuance of the bond comes as the country increasingly warms up to cryptocurrency and commits to using digital financial instruments.

“The Republic is committed to pioneering the use of new technologies in its central government debt management, as well as in its financial market in general.”

Government of Slovenia.

Although it is one of the smaller nations in Europe with a population of 2.1 million, Slovenia has become an important player in attracting crypto investors and companies.

Its capital, Ljubljana was in 2022 named the most crypto-friendly city. Slovenia charges no VAT or capital gains on digital assets, making it more attractive.

Research firm CoinCub also ranks Slovenia 16 in terms of crypto-friendly regulation, taxation, talent, ecosystem, and finance factors. Switzerland ranks first, according to CoinCub, followed by Singapore, the United Arab Emirates (UAE), and the US.

The development also comes as the entire region has also been gearing up for the Markets in Crypto Assets (MiCA) regulatory framework, which is expected to shape the crypto landscape as central banks inching their way towards a blockchain-powered future.

A step towards enhancing transparency

The ECB carried out its first test of the settlement of wholesale CBDC in May and promised more trials and experiments later. The first experiment was carried out by the Central Bank of Austria.

According to the ECB, this looked at the tokenization and simulated delivery-versus-payment settlement of government bonds in secondary market transactions against central bank money.

The Slovenian government says this is a step in the right direction, which should enhance transparency and efficiency.

“These initial transactions and experiments with wholesale tokenized central bank money represent an important steppingstone to greater transparency and efficiency of financial markets with wider technology adoption,” said the Slovenian government.