The World Bank has mandated the Commonwealth Bank of Australia (CBA) to arrange the financial industry’s first “blockchain bond.”
The bond, which will be known as the Blockchain Offered New Debt Instrument – or more simply as the “Bondi” after the iconic beach in the CBA’s home city of Sydney – will go on sale later this month and aims to raise about $70 million.
The Washington-based World Bank, that issues between $50-$60 billion worth of sustainable development-focused bonds into international capital markets every year, with the aim of funding “programs and activities that achieve a positive impact,” says investor interest in the bond has been “strong.”
The bank said blockchain is being used because it has the potential to streamline processes among numerous debt capital market intermediaries and agents. This, said a bank announcement, “can help simplify raising capital and trading securities; improve operational efficiencies; and enhance regulatory oversight.”
Denis Robitaille, World Bank Group Chief Information Officer, added: “Helping countries transition to technology-led development is key to our goals of reducing poverty and promoting lasting development. This is at the heart of the World Bank’s ‘Innovation Lab’ and this 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 as we strive to achieve the Sustainable Development Goals.”
The World Bank says it now expects other issuing banks to enter the market with their own blockchain-based bonds. “Already some central banks are assessing how they can use blockchain for settling transactions,” said the World Bank’s manager of treasury asset and liability operations, Paul Snaith.
The bond will be run in the US on World Bank infrastructure using the Microsoft Azure cloud computing platform and will sit on a private Ethereum-based blockchain that will be jointly run by the World Bank and CBA. Microsoft also validated the system’s operational capabilities, security and scale.
The World Bank, or to give its full title, the International Bank for Reconstruction and Development, is an international organization created in 1944 that operates as a global development cooperative owned by 189 nations.
It provides loans, guarantees, risk management products and advisory services to middle-income and other creditworthy countries to support the Sustainable Development Goals and to end extreme poverty and promote shared prosperity. It also provides leadership to coordinate regional and global responses to development challenges.