US retail giant Overstock has sold a $5m “cryptobond” to FNY Managed Accounts, a New York-based trading firm.
The sale is part of a proof of concept showcasing how financial instruments can be digitized and traded on cryptographic distributed ledgers such as the bitcoin blockchain.
The project was first announced in April and later detailed further in June. At the time, the company announced that CEO Patrick Byrne had purchased a $500,000 cryptobond. Overstock has said it could sell as much as $25m in cryptobonds as part of the project.
The cryptobond sold to FNY will pay 7% interest over a five-year period. As an added security precaution, Overstock will issue a $5m loan to the firm with a 3% annual interest, an arrangement the company said would “transfer the economic risk associated with the failure of the technology”. Both agreements come with their own put and call terms.
As part of the deal, the release suggested that FNY’s HYDRATrade, its…