World's First Blockchain-Managed Bond Launched

Banking, finance, and taxes

Published: August 24, 2018 8:50 am

Last Updated: January 11, 2020 6:53 pm

The World Bank and the Commonwealth Bank of Australia (CBA) have launched the first bond offering that was created and managed solely using blockchain technology. The A$100 million ($73.16 million) two-year, AAA-rated offering priced on Wednesday with a yield of 2.251%, 23 basis points above benchmark rates.

There have been other prototype bond issues using the blockchain (distributed ledger) mechanism, but those were mainly private placements. The World Bank issue, which is managed by CBA, is the first bond offering made directly to the public.

CBA executive general manager James Wall described the offering to Reuters earlier this month:

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.

The offering has been dubbed a “Bondi” bond, an acronym for Blockchain Operated New Debt Instrument and is an initial step in eliminating manual processes by moving toward a faster, cheaper automated system. Bondi is also the name of a famous Australian beach.

Australia has set a 2020 target date to integrate blockchain into its government and financial sector. The Australian Securities Exchange began work last December on a new system using blockchain to replace its existing system for processing equities transactions.

Last month IBM signed a $740 million five-year contract with the Australian government to provide blockchain and other new technologies to government departments. According to Reuters, Australia is a popular location to test financial innovation because the country has a strong financial infrastructure and a well-understood and heavily traded currency.

The World Bank issues between $50 billion and $60 billion of AAA-rated bonds annually to support economic development in emerging nations.

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