AIIB Issues First Digital Bonds on Euroclear Platform: A&O Shearman Advises

A&O Shearman has acted as legal counsel to Citigroup Global Markets Limited and Bank of Montreal in their roles as joint lead managers on the Asian Infrastructure Investment Bank's (AIIB) inaugural issuance of digital securities, known as "digitally native notes", on the Digital Financial Market Infrastructure (D-FMI) platform developed by Euroclear Bank.

The firm also advised Citibank, N.A. London Branch in its capacity as agent for the transaction. The issuance, which totalled USD300 million, consisted of 4% digitally native notes due 2027. Governed by English law and listed on the regulated market of the Luxembourg Stock Exchange, the notes were issued under AIIB's Global Medium Term Note (GMTN) programme. Crucially, the notes were settled on a T+2 basis via the D-FMI platform, demonstrating AIIB's commitment to embracing innovative digital solutions.

The D-FMI platform, developed by Euroclear Bank, provides a seamless and efficient mechanism for the creation, issuance, and settlement of fully digital international securities. Notably, the platform integrates with Euroclear's traditional settlement platform, enabling investors to hold these digitally native notes through their existing access to the established Euroclear architecture. This integration fosters a smooth transition to digital securities while offering investors a familiar and convenient experience.

A&O Shearman Partner Peter Crossan, who led the transaction, highlighted the firm's expertise in navigating complex legal and regulatory landscapes: "We are thrilled to have collaborated with Citi and BMO to support AIIB's ambition to spearhead digital transformation and advancement in the capital markets. Our deep understanding of capital markets and financial market regulations, both in English and Belgian law, proved invaluable in identifying and resolving legal and regulatory issues inherent in nascent market infrastructures such as the D-FMI platform."

The A&O Shearman team advising the Joint Lead Managers was led by capital markets partner Peter Crossan in London, supported by senior associate Michael Hossack and associate Lachlan Hopwood. Belgian law expertise was provided by partner Slyvia Kierszenbaum and associate Maxime Leleu in Brussels. The team in London advising the agent was led by capital markets partner Morgan Krone, alongside senior associate Louisa Ingham and associate Esi Armah-Tetteh.

This landmark issuance marks a significant step forward in the adoption of digital securities, showcasing AIIB's commitment to innovation and efficiency. The seamless integration of D-FMI with Euroclear's existing infrastructure signals a promising future for the development and widespread adoption of digital securities in the global capital markets.