The Commonwealth Bank of Australia (CBA), the country’s largest bank, has won a mandate from the World Bank to become the sole arranger of a bond exclusively created and managed on a blockchain.
Dubbed ‘bond-I’ – Blockchain Offered New Debt Instrument- with a nod to Australia’s famous Bondi beach, the pioneering issue will be the ‘first bond globally to be created, allocated, transferred and managed using blockchain technology”, the World Bank said in a press release on Friday.
Following its launch, the bond will be issued and managed on a private Ethereum blockchain operated by the World Bank in Washington and CBA in Sydney, the Australian 'big four' bank added. Ethereum “offers the functionality” required for the blockchain bond issuance whilst having “the largest and most active development community globally”, the CBA added, insisting it would remain open to other blockchains in the future.
Specifically, the World Bank will use Microsoft’s cloud computing platform Azure to run the bond in Washington. The tech giant has already validated the Ethereum platform’s operational “capabilities, security and scale”, the World Bank added.
Investors’ indicative interest in the blockchain-exclusive debt instrument “has been strong”, the World Bank added, picking Australia’s CBA for the endeavor in seeking to streamline and simplify trading and capital raises.
CBA general manager for international markets James Wall heralded the partnership for using the decentralized technology to increase the efficiency of financing for countries with extreme poverty.
“We believe that this transaction will be groundbreaking as a demonstration of how blockchain technology can act as a facilitating platform for different participants.”
Every year, the World Bank issues between US$50 billion-$60 billion in bonds for sustainable development in emerging economies. The international financial institution – formed with a mandate to provide loans for capital projects in countries around the world – underlined blockchain’s “potential to streamline processes among numerous debt capital market intermediaries and agents” to improve operational efficiencies and regulatory oversight.
World Bank Group chief information officer Denis Robitaille stated:
"Helping countries transition to technology-led development is key to our goals of reducing poverty and promoting lasting development…[T]his pioneering bond is a milestone in our efforts to learn how we can advise our client countries on the opportunities and risk that disruptive technologies offer."
Other participants involved in the development of the blockchain bond will include the Victoria state’s Treasury, asset manager giant Northern Trust and QBE, Australia’s largest global insurer.
As reported in January 2017, the CBA has experience in creating a blockchain bond powered by smart contracts after trialing a ‘cryptobond’ prototype for the Queensland Treasury Corporation.
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