The World Bank and The Commonwealth of Australia are in the process of arranging the world’s first blockchain bond, according to an official statement published by the World Bank last week.
The international organization has chosen Commonwealth Bank of Australia (CBA), the multinational financial institution with businesses across New Zealand, Asia, the United States and the United Kingdom, to create a new bond initiative, called Bond-i, (which stands for Blockchain Offered New Debt Instrument). It is also a casual reference to the iconic Sidney touristic spot Bondi Beach. According to the World Bank, this important partnership will create the first bond in the world to be completely created, allocated, transferred and managed with blockchain technology. The bond is projected to raise between $50-$100 million, and profits obtained will go towards sustainable development initiatives tied to the World Bank’s Reconstruction and Development division.
Once launched, the Bond-i will be issued and distributed on a private Ethereum-based network, which according to CBA, “has the necessary capabilities to run the project”. This platform will be exclusively managed and operated by the Australian institution and the World Bank. Although the platform will be initially run in an Ethereum network CBA has previously stated that it was open to other options in the future as the project develops.
The World Bank, which operates as a global development cooperative owned by more than 180 nations, has previously set and eye on the progress of blockchain technology and cryptocurrency, globally, looking for ways to regulate and use its multiple applications to optimize processes and modernize current economic structures. According to a CBA and World Bank joint statement,
“Blockchain has the potential to streamline processes among numerous debt capital market intermediaries and agents. This can help simplify raising capital and trading securities; improve operational efficiencies; and enhance regulatory oversight”
CBA has often been at the forefront of financial innovation. The Bank issued the first globally traded and settled bond in 1989, as well the first electronic bond in 2000, now, 18 years later, the Australian institution will set the course for the years to come, utilizing blockchain technology to optimize bond processes. According to Arunma Oteh, World Bank Treasurer,
“Since our first bond transaction in 1947, innovation and investor satisfaction have been important hallmarks of our success with leveraging capital markets for development. Today, we believe that emerging technologies, equally offer transformative, yet prudent possibilities for us to continue to innovate, respond to investor needs and strengthen markets. We are therefore delighted that after working with our information technology colleagues and the Commonwealth Bank of Australia over several months, that we are now in a position to launch our first blockchain bond transaction. CBA’s commitment and Microsoft’s wealth of experience have been instrumental to achieving this historic milestone. Our sincere appreciation to our pioneer blockchain bond investors, who are partnering with us on this transaction because of our common desire to champion greater efficiency, and transparency as well as more robust issuance processes. Our goal is to continue to harness innovation for the benefit of markets and our mission of ending poverty and boosting shared prosperity.”
by Samuel Larreal