World Bank raises A$110 million through global blockchain bond

Maria Nikolova

Bond-i is the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology.

The World Bank has provided an update following the launch of bond-i (blockchain operated new debt instrument), the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology.

The two-year bond raised A$110 million, the World Bank said in a press release today. This marks the first time that investors have supported the World Bank’s development activities in a transaction that is fully managed using the blockchain technology.

The World Bank mandated Commonwealth Bank of Australia (CBA) as arranger for the bond earlier this month. The announcement was followed by a two-week consultation period with the market, with key investors indicating strong support for the issuance.

The bond-i blockchain platform was built and developed by the CBA Blockchain Centre of Excellence, housed in the Sydney Innovation Lab. This project builds on the leadership and experience of CBA’s dedicated blockchain team, which has taken a lead role in applying blockchain technology to capital markets.

Investors in the bond include CBA, First State Super, NSW Treasury Corporation, Northern Trust, QBE, SAFA, and Treasury Corporation of Victoria. CBA and the World Bank will continue to welcome investor interest in the bond throughout its life cycle, and enquiries from other market participants in relation to the platform.

Service providers to the bond’s platform include TD Securities as market maker, IHS Markit as independent valuation provider, Microsoft as independent code reviewer, and King & Wood Mallesons as deal counsel.

The bond is part of a broader strategic focus of the World Bank to harness the potential of disruptive technologies for development. In June 2017, the World Bank launched a Blockchain Innovation Lab to understand the impact of blockchain and other disruptive technologies in areas such as land administration, supply chain management, health, education, cross-border payments, and carbon market trading.

The World Bank sees blockchain as having the potential to streamline processes among numerous debt capital market intermediaries and agents. This may help simplify raising capital and trading securities; improve operational efficiencies; and enhance regulatory oversight.

Nevertheless, some financial institutions remain skeptical as to the actual benefits of blockchain. For instance, in June this year, the Netherlands central bank (DNB) published the results of a set of studies, indicating that blockchain is not capable to respond to the needs of financial markets infrastructure (FMI). The biggest shortcomings are inadequate capacity, inefficiency due to high energy consumption and lack of complete certainty about having made a payment.

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