Treasury certificates (TCs) are short-term financial instruments issued by a state to finance its liquidity needs. Traditionally, they are negotiable securities that the Treasury can issue quickly to obtain funds, as an alternative to short-term bank credit lines. Their negotiability on the markets makes them attractive to investors and enables the state to borrow at advantageous rates over short periods. A TC is generally issued at a discount (zero coupon) and repaid at its nominal value at maturity, with the difference representing the gain for the investor.
A digital treasury certificate (DTC) uses these same principles, with the difference that it is dematerialised on a blockchain register instead of simply being registered in the systems of a traditional central depository. For several years now, Luxembourg has been adapting its legal framework to authorise the issue and circulation of financial securities on distributed registers. Indeed, Luxembourg law explicitly allows bonds or other securities to be issued, transferred and held in digital form on a blockchain, with the same legal validity as traditional securities. A digital TC is therefore a digital twin of the classic Treasury bond: it confers on its holder a claim on the state, but this is materialised by a digital token recorded on a secure register.
An innovative issue on blockchain
The operation on 16 June, announced by the participating banks, represents a significant technological advance for the Luxembourg financial centre. It took place via HSBC Orion, a distributed ledger platform (private blockchain) developed by HSBC and based in Luxembourg. This Orion platform–known as a Central Account Keeper in regulatory jargon–offers a single digital register of ownership of securities issued and integrates the settlement-delivery process directly on the blockchain. In other words, treasury certificates have been created, allocated to investors and will be tracked until their final redemption via this decentralised system, without recourse to traditional clearing infrastructures.
The use of blockchain brings several specific features. Firstly, the recording of transactions is forgery-proof and traceable: each certificate transfer leaves a time-stamped digital footprint that is visible to authorised stakeholders. Secondly, the Orion platform enables instant delivery versus payment (atomic DvP), with settlement taking place in fiat currency (in euros) without the need for an intermediate cryptocurrency. The lifecycle of the security (issue, holding, settlement, maturity) is managed end-to-end on this distributed ledger, simplifying the process and limiting the number of intermediaries. Lastly, the operation was supported by Luxembourg’s so-called Blockchain laws, adopted between 2019 and 2023, which provide a high level of legal certainty for the issuance of securities on a distributed ledger. This combination of technological innovation and a suitable legal framework makes the issue a textbook case of sovereign digital finance.
Increased speed, security and transparency
What are the benefits of such an issue for the State and investors? Several benefits are highlighted by those involved in the project:
– speed and efficiency: the reduction in intermediaries and the automation offered by blockchain considerably speed up the issuance and settlement process. Transactions are carried out almost instantaneously, enabling Treasury to mobilise funds more quickly than with a traditional procedure. Blockchain eliminates the usual clearing and delivery times.
– security and traceability: as each certificate and each exchange is recorded in the distributed ledger, transactions are fully traceable. The history of movements is immutable, which reinforces confidence in the instrument and reduces the risk of fraud or error. In addition, the decentralised architecture reduces the risk of a single point of failure: the ledger is replicated on several nodes, guaranteeing the resilience of the system.
– transparency and trust: the blockchain serves as a single “source of truth” shared by the issuer and investors. Each party can verify the authenticity and validity of the certificates held. This increased transparency, together with compliance with Luxembourg’s laws on distributed ledgers, provides legal certainty and enhanced confidence for investors.
, Luxembourg’s finance minister, welcomed this innovative transaction, saying, “The issuance of digital treasury certificates (DTCs) underlines our commitment to remain at the forefront of technology with regard to financial infrastructure. It illustrates the innovative strength of our financial centre. I welcome this initiative by the State Treasury, which strengthens Luxembourg’s position as a leader in digital finance. This issue demonstrates the effectiveness of our blockchain laws, which guarantee the traceability and verifiability of transactions and ensure greater confidence and security for investors.”
Orion: a blockchain platform “made in Luxembourg”
The success of this issue is largely based on HSBC’s Orion platform, around which the project is built. Orion is a private blockchain infrastructure that was deployed in Luxembourg in early 2023 precisely to support this type of financial innovation. Attracted by the country’s favourable legal environment, HSBC designed Orion according to the specificities of Luxembourg’s dematerialised securities regime: the platform respects the two-tier account structure provided for by the DLT law, with HSBC acting as Central Account Keeper for the tokens issued.
In the context of the issuance of Luxembourg DLTs, two major banks played a key role. HSBC Continental Europe (via its Luxembourg branch) and BGL BNP Paribas were mandated as arrangers and lead managers to structure and place these digital securities with investors.
Note that the Banque centrale du Luxembourg and the Luxembourg Stock Exchange have also been closely monitoring these developments. Although, in this case, the certificates were not listed on a conventional stock exchange, the Orion infrastructure could eventually interface with international depositories and existing systems to ensure the accessibility and liquidity of these digital securities, similar to what has been tried out elsewhere in Europe.
Luxembourg, one of Europe’s pioneers
With this issue, Luxembourg confirms its position as a pioneer in the emerging ecosystem of sovereign digital finance in Europe. Until now, initiatives by European states in this area have been very rare. In July 2024, Slovenia became the first EU country to issue a government bond in the form of a token (€30m with a one-year maturity) as part of a pilot project involving the Banque de France and BNP Paribas’ private platform Canton. In the same year, France, via Caisse des Dépôts and Euroclear, conducted an experiment to tokenise a €100m bond on a permitted blockchain network, marking a “European first” hailed by the industry.
The Grand Duchy is part of this innovation dynamic, with its own unique approach. On the one hand, this is the first sovereign issue on blockchain to be carried out on a Luxembourg platform–Orion having been set up locally, whereas other initiatives have often used foreign infrastructures or cross-border pilot projects. In addition, Luxembourg benefits from a comprehensive legal arsenal (“Blockchain I, II, III” series of laws) that provides a clear framework for public or private issuers wishing to use distributed ledgers. Few European countries have so far established such explicit rules for tokenised finance. As such, Luxembourg is positioning itself as a regulatory and technological laboratory at the heart of the European Union, ready to take advantage of the European Digital Finance Package and the EU’s DLT pilot scheme.
In budgetary terms, the operation remains modest in scale. Issuing €50m in treasury certificates will above all enable the innovative system to be tested under real conditions, without adding significantly to the state’s debt. In perspective, Luxembourg’s public debt will be around €22bn in 2025, or just 24% of the country’s GDP – one of the lowest ratios in the eurozone. The amount of €50m represents only about 0.2% of the total outstanding debt, a virtually negligible percentage. In other words, Luxembourg did not have a pressing need for short-term financing; above all, it seized the opportunity to validate a new issuing technology within a prudent framework.
As the certificate issued is zero coupon, it does not incur any current interest charges for the State. It was priced at a slight premium to the investor: according to HSBC, the security was issued at a spread equivalent to Euribor 6 months -0.10%, reflecting Luxembourg’s high credit quality. This negative premium compared to the money market means that investors are prepared to pay a high price (yield slightly below the risk-free rate) to hold this very secure government security, a token of the confidence enjoyed by the country.
This article was originally published in .