World Bank launches world-first blockchain bond

Aug 24, 2018 13:28 IST
World Bank launches world-first blockchain bond

The World Bank on August 23, 2018 launched ‘bond-i' (Blockchain Operated New Debt Instrument), the world’s first bond to be created, allocated, transferred and managed by using distributed ledger technology.

This two-year bond successfully raised 110 million Australian dollars (USD 80.48 million).

This was the first time that investors supported the World Bank’s development activities in a transaction that is fully managed using the blockchain technology from start to finish.

Commonwealth Bank of Australia: Arranger for bond-i

Earlier on August 10, 2018, the World Bank mandated Commonwealth Bank of Australia (CBA) as arranger for the bond. This decision was taken after a two-week consultation with the market wherein key investors indicated strong support for the issuance.

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.

Investors

Investors in the bond include CBA, First State Super, NSW Treasury Corporation, Northern Trust, QBE, SAFA, and Treasury Corporation of Victoria.

Service providers

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.

Significance

The launch of the blockchain operated bond-i is part of a broader strategic focus of the World Bank to harness the potential of troublesome technologies like blockchain for development.

In this regard, the World Bank launched a Blockchain Innovation Lab in June 2017 to understand the impact of blockchain and other disruptive technologies in areas such as land administration, supply chain management, health, education, and cross-border payments.

The World Bank’s bonds, which carry AAA rating, are issued annually at a cost of USD 50 to USD 60 billion for sustainable development. The bank regularly uses its borrowing power to help develop new bond markets as well as pioneering new means for selling and trading the securities.

What is Blockchain technology?

• Blockchain is a digital ledger for storing data including financial transactions.

• The Digital records are put together into blocks and then leaped together cryptographically and chronologically into a chain using complex mathematical algorithms. The encryption process is termed as ‘hashing’.

• Hashing is carried out by different computers. If they all agree on the answer, each block receives a unique digital signature.

• Once updated, the ledger or blockchain cannot be altered or tampered with.

• Blockchain distributes information without it being copied.

• The information is held on blockchain through a shared database which can be accessed on a real-time basis.

• This database is not stored on physical servers but on the cloud, which makes it easy to store unlimited data.

• The most popular example of Blockchain technology is cryptocurrency and one such cryptocurrency that has gained momentum in recent times is Bitcoin.

 

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