First Abu Dhabi Bank is readying to issue the first digital bond in the Middle East via the HSBC Orion digital assets platform. The bond is currently at the pre-issuance pricing stage and will be listed on the Abu Dhabi Securities Exchange (ADX). The stock exchange facilitated the issuance after partnering with HSBC to explore digital bonds in late 2023.

“This initiative not only expands access to institutional-grade digital instruments, but also lays the foundation for a broader class of tokenized assets—including green bonds, sukuk, and real estate-linked products,” said ADX Group CEO Abdulla Salem Alnuaimi.

The three year, $100 million bond is being priced at SOFR+70bps and reflects the growing appeal of digital bonds in institutional markets. Key benefits of digital bonds include operational efficiencies through the use of smart contracts, improved settlement timing and reduced counterparty risk.

To facilitate issuances HSBC Orion operates multiple blockchain networks, one based in Luxembourg and the other in Hong Kong. This issuance will use the Hong Kong platform which is integrated with the Central Moneymarkets Unit (CMU), the local central securities depository (CSD). This path 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. The bank is the sole global coordinator, lead manager and bookrunner on the transaction.

There are several digital bond platforms with most only conducting occasional issuances. In the past nine months HSBC Orion has been the most prolific, including a digital treasury note issued by the state of Luxembourg last month. This is at least the seventh issuance during that period. Previous issuances started with a HK$1 billion bond issued last September by the bank itself and included the €100 million digital bond from the European Investment Bank (EIB) settled using a wholesale CBDC.

FAB’s blockchain prowess

Separately, the bond issuer FAB has a strong track record on blockchain, mainly on the payments front. It is planning to issue a Dirham stablecoin, and is a user of JP Morgan’s Kinexys Digital Payments platform. Additionally, it was amongst the first foreign users of China’s digital RMB, and is a participant in the mBridge cross border CBDC platform that currently involves the central banks of China, Hong Kong, Saudi, Thailand and the UAE.

Updated: added bond issuance amount, term and pricing.