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.
CBA said it is the sole arranger of the first bond globally to be created, allocated, transferred, and managed using blockchain technology.
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.
CBA added that Ethereum offers the functionality required for the blockchain bond issuance whilst having the largest and most active development community globally, insisting it would remain open to other blockchains in the future.
Potential to Streamline Processes
The institutions were full of praise fpr blockchain, hailing it as the solution to various issues – not only in the financial and capital markets, but also in other sectors. A joint release from the two organizations read:
“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.”
Specifically, the World Bank will use Microsoft’s cloud computing platform Azure to run the bond in Washington. According to the World Bank, the tech giant has already validated the Ethereum platform’s operational capabilities, security and scale. Indicative investor interest in the blockchain-exclusive debt instrument “has been strong”, the World Bank added, picking Australia’s CBA for the endeavor in order to streamline and simplify trading and capital raises.
The CBA general manager for international markets, James Wall, heralded the partnership for using decentralized technology to increase the efficiency of financing for countries experiencing 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 – has been at the forefront of improvements to operational efficiency and regulatory oversight, through the adoption of new technologies.
According to Reuters, 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.
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