Earlier this month, the World Bank selected Australian bank, Commonwealth Bank (CBA) to issue its pioneering bond which will be settled using blockchain technology. This bond will be settled next week according to a news report by Reuters.
On Thursday, CBA confirmed to Reuters that the bond worth $100 million AUD ($73 million USD) will be transacted via blockchain on August 28.
Bond-i, World Bank’s first Bond to be settled via Blockchain
In its earlier announcement, the World Bank said that its current system of issuing bonds is plagued with inefficiencies. The system involves several back-and-forths, follow-ups and manual entries which can be slow, complicated and expensive. It, therefore, opted to use a blockchain-enabled system to order and transfer the ownership of its latest bond, the Bond-i.
Bondi-I is a two-year designed to yield a 2.25 percent return and is part of the $50–$60 billion in bond sales the World Bank issues every year to combat poverty and improve back economic progress in developing countries. It will be the first bond by the World Bank to be settled using blockchain. CBA will solely arrange and issue the bond. It will do this through a blockchain network it has built on ethereum platform.
Issuing Bonds over Blockchain Networks
By utilizing blockchain technology for bond settlements, both parties remove the need for middlemen—that is clearing houses –as they are directly connected by nodes on the network. This system has been described as faster, more efficient, cost-effective, and the future of settlements.
Bond-I, however, will not totally rely on blockchain. The actual payments will be made off-chain through the existing SWIFT system. Blockchain will be used to automate the issuance process.