In what is claimed to be the first global blockchain bond, the World Bank has announced a bond issued entirely using DLT. The manager of the worlds first blockchain bond is to be the Commonwealth Bank of Australia, who were recently sanctioned with the largest fine in Australian corporate history due to AML negligence.
Bond-i: the first blockchain bond?
The name of the two-year blockchain bond is “Bond-i”, an acronym for ‘blockchain offered new debt instrument’, while also referring to a famous beach in Sydney. It is said to be the first digital bond to be created, maintained, and distributed using DLT. However, this has already been done in Russia, where state-owned Sberbank launched a commercial bond using the Fabric Hyperledger. The difference might lie in the status of a ‘global blockchain bond’ against a ‘blockchain bond’.
Upon launch, the foreign bond issued in AUD will be distributed on a platform running a private Ethereum network, managed and operated by CBA in conjunction with the world bank.
Bond-I is being developed by CBA in their blockchain lab, and the stakeholders involved in the issuance are to be participating nodes. The blockchain bond was reviewed by Microsoft for any loopholes and to ensure its efficiency and resilience. The infrastructure will run on Microsoft’s Azure cloud platform. Proceeds from the bond are to be distributed towards humanitarian projects. According to the World Bank –
“Yesterday @treasury_wb made history by creating the first global #blockchain bond. The @WorldBank has mandated @CommBank as the sole arranger for bond-i, the first global bond to use distributed ledger technology.”
Blockchain bonds – looking ahead
The issuance of blockchain bonds by the world bank was likely not what Satoshi Nakamoto had in mind when he built the first decentralized cryptocurrency and wrote the associated white paper. In the wrong hands, it could simply accelerate more debt and increase the process of tracking individual transactions.
While central banks seem to be more open to the idea of DLT and its benefits, the usage is still centralized, and the risks of malfeasance remain unless large structures are broken apart.
Other partners in the Bond-i project include Northern Trust, King and Wood Mallesons, QBE, and the Treasury Corporation of Victoria. Ethereum was chosen as it had the largest and most active community. CBA has used DLT for other projects, including the supply-chain tracking of almond shipments.
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