Australia’s largest bank which is the Commonwealth Bank of Australia (CBA), has issued a public bond exclusively through blockchain technology in conjunction with the World Bank. According to Reuters the World Bank’s official mandate for this groundbreaking project was first officially unveiled on August the 10th. This deal involves a 100 million Australian dollar funding which will entail two-year bonds that will be settled on the 28th of August and are expected to generate a 2.251 percent return on investment according to a CBA statement.
This deal was born out of the realization that the blockchain had the potential of setting processes right when it comes when it comes to numerous market intermediaries and agents. This does a lot by way of simplifying trading securities, the raising of capital, enhancing operational efficiencies, and regulatory oversight. The issuing of this bond has exceeded the World Bank’s track record of issuing 50 to 60 billion dollars to projects that pursue sustainable development.
The endeavor by the World Bank and the Commonwealth Bank of Australia has led to the birth of a prototype known as “Bondi” (Blockchain operated New Debt instrument) the name was also intended as a pun for Australia’s most popular beach. This prototype has been heralded by many in the industry in the future when it comes to automating sales practices and bond issuance. According to CBA’S executive general manager, James Wall, Bondi will help break down the traditional bond issuing process from a manual bookbuild process to a process that will happen instantaneously.
In case of any lingering doubts about the World Bank bond, you should note that the World Bank has a AAA rating when it comes to creditworthiness. The deal between the Commonwealth Bank of Australia and the World Bank is not the first of its kind. Back in May, Sberbank CIB the corporate and investing banking arm of Sberbank carried out the first blockchain based commercial bond transaction in Russia. This initiative by Sberbank was done in conjunction with partners such as Local telecom firm MTS alongside the national settlement depository (NSD). This Russian operation was carried out to facilitate the issuance of MTS corporate Bonds which were valued at 12 million dollars.
Prototype “Bondi” seems to have been born at the right time since Australia is currently seeing a lot of blockchain initiatives being carried out in order to integrate the blockchain across government. According to Reuters, the Australian Securities Exchange (ASX) is working to replace its current equity transactions processing system with a blockchain based system. This process is set to be completed by the year 2020.