In a pioneering move, the World Bank has called for the construction of a blockchain-based bond via the Commonwealth Bank of Australia (CBA). CBA has an existing system based in private blockchain making use of the Ethereum network already and this new offering, a Blockchain Offered New Debt Instrument (bond-i) will be issued by its partner in this project, the Washington-based financial behemoth.
The World Bank is trying to transform the bond issuance space by harnessing the immense potential inherent in blockchain technology. It is convinced that the technology will prove instrumental in improving several operations of the organisation, including but not limited to the $60 billion worth of bonds it annually issues to power sustainable development.
It may be conjectured that the World Bank’s decision to partner with the CBA might have been motivated by the existence of its superior Blockchain Centre for Excellence (under the CBA Innovation Lab). Indeed it was this Centre that ultimately used its previous expertise of having tested a prototype bond on blockchain last year, to successfully develop the bond-i.
What makes this project all the more exciting is the fact that it will use a private Ethereum blockchain for creating and managing new bonds. Microsoft, another huge name in the technology industry, has run a test on this project, evaluating its construction quality, security features and resilience. The approval from the tech giant has enhanced the project’s credibility further.
This is the world’s first example of bond issuance via blockchain but that is not to say that the world of debt hasn’t made use of blockchain before. BBVA, a banking group from Spain has signed a $117 million loan in July over blockchain, in order to ensure transparency and traceability. However, most finance giants are still shying away from embracing blockchain and the crypto industry with enthusiasm comparable to that shown by the World Bank. For example, Jamie Dimon, CEO of JPMorgan Chase had stated that the company will adopt blockchain for several projects and the firm had even filed peer-to-peer system patents. Despite this apparent enthusiasm, they also dubbed blockchain and crypto as a risky affair and steered clear of real implementation. However, with the World Bank move, here’s hoping the times they are a-changin.