International Bank for Reconstruction and Development, (IBRD) is the first of the five member banks that compose The World Bank, has mandated the Commonwealth Bank of Australia (CBA) as the sole facilitator to create the World’s first blockchain bond, that will be allocated, transferred and managed through its life cycle using distributed ledger technology.
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. World Bank, Press Release
The Kangaroo bond, referring to foreign bonds issued in Australia in the local currency, has been named bond-i, is the blockchain Offered New Debt Instrument. Indicative investor interest in bond-i has been strong. The World Bank and CBA expect to launch the transaction following a period of consultation with many different investors from all around the world. It is expected that once launched, the bond will be issued and distributed on a blockchain platform operated by the World Bank and CBA in Washington and Sydney, respectively.
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. Treasurer World bank
According to the institution, the bond will be the first in the world to be created, allocated, transferred and managed with blockchain technology. The tech, which underpins cryptocurrencies like bitcoin, refers to the distributed ledger technology that securely records all transactions made on the chain.
Bonds issued by World Bank in past
The World Bank issues between US$50-US$60 billion every year in bonds for the sustainable development throughout the world. It has a 70-years of a track record of innovation in the capital markets. Among its very first issuance is the first bond in the global format, a globally traded and settled bond issued in September 1989; and after that the first e-bond, which was a fully integrated electronic bond issued in January 2000. As a frequent issuer in the Australian dollar market since 1986, raised almost AUS$60 billion from investors globally.
World Bank’s mission behind this blockchain bond
Officials from the World Bank appreciated the CBA’s commitment and Microsoft’s wealth of experience that have been instrumental in achieving this historic milestone. Arunma Oteh is the World Bank Treasurer, she said that 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.
Another official from the World Bank, Denis Robitaille, is World Bank Group Chief Information Officer, also endorsed the blockchain technology and said, “We at the World bank Helping countries transition to technology-led development, which 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”. A private Ethereum based blockchain is in use for the project as it has the necessary capabilities, but CBA said that it was open to other options in the future as space develops.
Commonwealth Bank Of Australia (CBA)’s take on blockchain bond
The bond-i blockchain platform was built and developed by the CBA blockchain centre of Excellence. Since 2009, CBA has acted as lead manager for a number of International banks for Reconstruction and Development (IBRD) bond issuance in the Australian and New Zealand capital markets. CBA’s dedicated blockchain team has taken a lead role in applying blockchain technology to capital markets.
We believe that this transaction will be ground breaking as a demonstration of how blockchain technology can act as a facilitating platform for different participants. We are delighted to have partnered with the World Bank and fully support its vision of making innovative use of technology such as blockchain to increase the efficiency of financing solutions to better achieve their goal to end extreme poverty.James Wall, GM Executive, CBA
The World Bank, meanwhile, said investor interest in the bond has thus far been strong. Together with CBA, it intends to launch the transaction after wider consultation with more investors. Advocates of blockchain technology say it makes processes faster and more secure, but some are concerned amid hype around the technology’s potential that the intense fanfare could potentially lead to a bubble.
World Bank infrastructure for the bond will run in Washington, D.C. on the Microsoft Azure cloud computing platform. Microsoft validated the system’s operational capabilities, security, and scale.