This Week, World Bank Will Settle $73 Million Worth Blockchain Bond on Ethereum
According to the latest report from Reuters, World Bank is scheduled to settle the ‘world’s first public blockchain bond’ worth a whopping $73 million on Tuesday, August 28. Australia's Commonwealth Bank (CommBank) has been selected as the sole arranger for the blockchain bond that is expected to yield a 2.251% return.
Dubbed as ‘Bondi’ which stands for Blockchain Operated New Debt Instrument, this two-year bod will focus on improving the operational efficiency of automated financing which will be taking over the decades-old manual bond process, especially for economically backward countries laden with extreme poverty.
CBA has set the price for the “kangaroo” deal at 23 basis points over and above the benchmark rates, Bonds that are issued in AUD by foreign institutions are referred to as “kangaroo” bonds.
James Wall, executive general manager at CBA told Reuters “You’re collapsing a traditional bond issuance from a manual bookbuild process and allocation process, an extended settlement then a registrar and a custodian, into something that could happen online instantaneously.”
Unlike other similar bond projects powered by the blockchain technology, the Commonwealth Bank said that Bondi is the first-of-kind legally valid bond issuance that is completely operated on the blockchain platform while raising capital from public investors. Commonwealth Bank’s in-house blockchain lab will facilitate the platform for the bond issuance.
James Wall also said: “We take a collaborative approach to innovating and have a track record of partnering with other leading financial institutions, government bodies and corporates to innovate through blockchain. We believe that this transaction will be groundbreaking as a demonstration of how blockchain technology can act as a facilitating platform for different participants,” while further adding “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.”
On an annual average, the World Bank issues bonds worth $50-$60 billion to push sustainable developments in the emerging markets. The Bondi bond will be issued an operated using a private Ethereum blockchain that is controlled by the World Bank in Washington and the CBA, in Sydney. The World Bank has previously said that they have already validated Ethereum’s “capabilities, security and scale” for the bond issuance.
Head of Blockchain at CBA, Sophie Guilder, said; “We know blockchain has the potential to revolutionize financial services and markets, and this transaction is a significant step towards that future state. By working collaboratively with the World Bank, we were able to find solutions to technical and legal considerations to make this ground-breaking transaction a reality.”