The first global blockchain bond

Named bond-i, the World Bank bond will be created and managed with distributed ledger technology.

The World Bank has announced it is partnering with the Commonwealth Bank of Australia (CBA) to issue the world’s first-ever global blockchain bond.

The new bond is named bond-i, an acronym for Blockchain Offered New Debt Instrument — and a reference to one of Australia’s most famous beaches, Bondi Beach in Sydney.

The operation could lead to “a golden future” for financial services for developing nations, a World Bank official told news agency Agence France-Presse.

“Today we make history,” reads a tweet by World Bank treasurer Arunma Oteh.

“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,” she added in a World Bank press release.

It is “the first bond globally to be created, allocated, transferred, and managed through its life cycle using distributed ledger technology,” reads the release from the World Bank, which issues between $50 billion and $60 billion annually in bonds to fund sustainable development in emerging economies.

“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,” the release adds.

As MIT Technology Review points out, “there aren’t many details available yet on how this will actually work from a technical or logistical standpoint.” It seems that “unlike Bitcoin, where anyone can engage in mining, the process of verifying new transactions, the World Bank will use a private version of ethereum in which validators must have permission.

The CBA mentions that, currently, the Ethereum platform has the largest and active development community, offering the features they require. However, other blockchains are rapidly developing and CBA will keep open to other options in the future.

The development of this offering has been conducted with the support and input of the investor community including Northern Trust, QBE, and the Treasury Corporation of Victoria. World Bank infrastructure for the bond will run in Washington DC on the Microsoft Build Azure cloud computing platform. Microsoft validated the system’s operational capabilities, security, and scale.

“The idea of using blockchains to manage bonds is gaining traction,” MIT writes. “Last year, a company in the UK [namely, Nivaura] issued a bond using Ethereum’s public blockchain. The city government of Berkeley, California, is exploring the use of blockchain technology to issue municipal bonds. The World Bank’s endorsement of the idea is the highest-profile one to date.”

The new bond by the World Bank comes under AAA rated, and will focus to raise the capital for the Reconstruction and Development division of the World Bank. The CBA, according to its spokesperson, says that the bond is expected to raise in between $50 and $100 million.