The finance world is all set to witness world’s first blockchain bond. The World Bank announced that it will sell the first-ever digital finance bond which will be issued entirely using blockchain technology. The World Bank has arranged one of the “Big Four” banks in Australia, the Commonwealth Bank of Australia (CommBank or the CBA) as the sole manager of the blockchain bond. CBA will arrange for the creation, allocation, transfer and manage the first bond through its life cycle using distributed ledger technology.
Bond-i – The Blockchain Bond
Bond-i is the name of the two-year blockchain bond that has created much of a buzz. Bond-i is an acronym for Blockchain Offered New Debt Instrument, and also refers to the tourist famous Bondi Beach in Sydney.
Bond-i will be the first digital bond to be entirely created, managed, allocated and even transferred using blockchain technology. This Kangaroo Bond also called as Matilda bond will be a foreign bond issued in Australia using the Australian dollar. When launched, Bond-i will be issued and distributed on a blockchain platform that runs on an on a private Ethereum network, which will be managed and operated by the CBA and the World Bank
Bond-i – The Technology Behind
Bond-i is being developed internally by CBA’s blockchain lab and aims to have the stakeholders involved in the Bonds issuance process be participating nodes in the network. The stakeholders to the blockchain bond include the investors as well as the banks.
Bond-i is created upon the Ethereum network, which was chosen by the CBA as it had the required capabilities; however, the banking major said that it was open to other networks in the future as the blockchain digital finance technologies developed. The blockchain bond had been reviewed by Microsoft for any loopholes thus, ensuring its architecture, resilience and security features were good to go ahead.
Bond-i – The Investment Numbers
World Bank annually issues $50 billion to $60 billion worth of bonds in a bid to reduce poverty and also to improve economic parameters across the world. The Washington-based development lender, World Bank aims to raise about AUD$50 million (about $36 million or around INR252 crores), which could double up if the blockchain bond Bond-i attracts more investors to get involved before when the bond is finalised during the week of August 20. For now, to invest, investors will have to register and all cash will be transmitted separately from the blockchain through the normal channels in the old fashioned way.
Blockchain Bond – The Path Ahead
Blockchain technology works behind cryptocurrencies like Bitcoin which are in vogue today. The mystery behind cryptocurrencies dealings often brings suspicion about their reliability and volatility amidst its deployment in varied domains ranging from digital transactions to funding criminal activities.
Unveiling the new blockchain bond in an official announcement, the World Bank and the CBA released a joint statement stating that the blockchain technology could streamline processes for multiple debt capital market agents as well as its intermediaries. The adaptability of the blockchain technology will simplify trading securities, improve efficiencies in operations, assist in raising capital, and improve regulatory oversights.
Through the blockchain bond, the World Bank aims to gain experience to deal with the blockchain technology and maintain a digital public registry of transactions. Blockchain bond seeks to achieve a golden future for financial services for developing nations. The immense popularity of blockchain technology has led several major banks to explore opportunities in this domain including the Agricultural Bank of China, JP Morgan Chase & Co. and BBVA.
The way the world transacts financially has just entered a new blockchain revolution!