In a significant move for blockchain adoption in the financial services realm, the World Bank has issued “bond-i,” a major bond using distributed ledger technology.
Bond-i was announced in late August, though the bank, whose mission centers on eradicating poverty across the globe, announced a mandate for the bond two weeks earlier. The World Bank and its partners will manage the bond using a permissioned blockchain based on Ethereum. The Microsoft Azure cloud will provide the infrastructure for hosting the blockchain.
Bond-i is a two-year bond that has raised $79 million ($110 million Australian dollars). Investors include the Commonwealth Bank of Australia (CBA), First State Super, New South Wales Treasury Corporation, Northern Trust, QBE, SAFA and the Treasury Corporation of Victoria.
Each of those partner organizations is a major bank, insurer or other finance company based in Australia. And indeed, the platform that the World Bank is using to issue bond-i was developed in the CBA’s Blockchain Centre of Excellence in Sydney. So, although the World Bank’s ambitions for using financial services to end poverty are global in nature, the money and technology behind this particular project is centered firmly in Australia.
Beyond the organizations listed above that served as investors, Microsoft also contributed to the bond-i platform as an “independent code reviewer,” according to the World Bank. Other companies provided financial and legal services related to the bond.
The bank noted that the bond is part of a larger effort “to harness the potential of disruptive technologies for development.” The announcement follows the launch by the bank in June 2017 of the Blockchain Innovation Lab, whose mission includes not just blockchain-based innovations related to finance but also ways to improve governance using a blockchain.
First Blockchain Bond? Maybe Not
It may be something of a stretch to call bond-i the world’s “first” blockchain-based bond. The design for blockchain-based bonds was patented as far back as 2012. Daimler issued a 100 million euro bond in 2017 using a permissioned blockchain based on Ethereum. A Japanese company issued a small-scale bond using bitcoin in the same year. So, this is not a hands-down, first-of-its-kind move.
In fairness, though, the World Bank is not calling bond-i the very first blockchain-based bond. It is saying that it’s the first “global blockchain bond,” however.
By most measures, bond-i is indeed the first bond issued by a financial institution with global reach — even if, as noted above, the financing for this bond is based pretty squarely in Australia.
Critics might also point out that bond-i is being powered by a private, permissioned blockchain running on centralized infrastructure. That approach makes the news less exciting for blockchain enthusiasts than a major bond issued on a public, fully decentralized blockchain would.
Still, at a time when the hype around blockchain technology’s ability to transform global finance over the long term seems to be waning, any move by a financial organization as prominent as the World Bank to entrust a mainstream financial service to a blockchain is a big deal. Although the World Bank and its investors may not yet be ready to leave the cozy environs of a permissioned blockchain, they’re taking an important step toward decentralizing finance.
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