World Bank Prices Its Blockchain Bond at $73 Million USD
The World Bank’s first step into blockchain is estimated to raise $73 million USD from the blockchain “bond-i” facilitated by its arranger, Australia’s Commonwealth Bank (CBA). The international lender is foraying into distributed ledger tech in a bid to test revamping the traditional, increasingly archaic processes used in bond sales.
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Earlier this month, the World Bank announced a forthcoming blockchain-based bond, dubbing it bond-i for Blockchain Offered New Debt Instrument. According to CBA, one of Australia’s big four banks, specifics have started to materialize on the project, as the bond-i is now pegged at a two-year maturity term and is set to rake in a 2.251 percent yield.
The Name’s Bond … Blockchain Bond
Australia’s advancing financial foothold has made it a favorable testing ground for piloting new technologies. The bond-i, now estimated to imminently raise approximately $100 million in Australian dollars (AUD), is only the latest example of that dynamic.
That’s a drop in the bucket compared to the wider global bond market, of course, but it’s an important adoption pilot for blockchain tech that could be the first of many more DLT dominoes to come.
CommBank’s development of the new blockchain bond is undergirded by its prior experience in using blockchain technology for issuing bonds. Last year, the CBA Innovation Lab issued a government bond for the Queensland Treasury Corporation.
Recently, CBA also developed a blockchain platform to oversee an international almond shipment from Australia to Germany. The Ethereum-based system permitted all supply chain participants to track and manage the almond shipment in real-time.
Australian financial giant CommBank is also leveraging a private Ethereum chain to oversee the issuance of a so-called Kangaroo bond, wherein a bond is issued overseas but in AUD. The world’s biggest software company, Microsoft Corporation, has collaborated with the bank on the project.
Of the bond-i’s new pricing and what it portends, CBA executive general manager James Wall 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,”
A Taste of What’s to Come?
Blockchain-based bonds bear the potential of making the entire bond-issuing process more efficient and inexpensive. Settling transactions in seconds and offering complete transparency are keystone merits of the use case.
And, if all goes well, World Bank can definitely make use of the new process — the global lender annually issues over $50 billion in bonds to cater to sustainable economic growth across the globe.
World Bank Treasurer Arunma Oteh recently said of blockchain’s potential:
“We believe that emerging technologies, equally offer transformative, yet prudent possibilities for us to continue to innovate, respond to investor needs and strengthen markets.”
More and more major financial institutions have been embracing the disruptive tech as of late. Last year, German car manufacturer Daimler issued $114 million in bonds on a private Ethereum blockchain. It, along with bond-i, seemingly mark the first of many blockchain-backed bonds to come.
A trickle may be becoming a stream right in front of our eyes.
What do you think about World Banks move to leverage DLT? Share your views in the comments section.
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