The World Bank is issuing a bond on blockchain. The first of its kind issuance is being orchestrated via the Commonwealth Bank of Australia (CBA) as sole arranger. According to the World Bank, the security will be created and managed completely using distributed ledger technology (DLT – ie blockchain). The World Bank is a frequent issuer in the Australian dollar. CBA has acted as lead manager for a number of World Bank bond issuances in the Australian and New Zealand capital markets.
The World Bank has labeled the blockchain bond a “bond-i,” for blockchain operated debt instrument, and indicates interest in the security has been strong. The World Bank and CBA expect to launch the transaction following a period of consultation with potential investors.
Blockchain has the potential to streamline processes among numerous debt capital market intermediaries and agents, states the World Bank. This can help simplify raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight.
Each year, the World bank issues between $50 and $60 billion in bonds thus the shift to blockchain bonds may be deemed a demonstrable proof of the efficacy of issuing securities on blockchain. World Bank points to a history of “pioneering issuances” – mentioning it was the first bond ever to issue in a global format in 1989. It also issued the first “e-bond” in 2000.Each year, the World bank issues between $50 and $60 billion in bonds thus the shift to #blockchain bonds may be deemed a demonstrable proof of the efficacy of issuing securities on blockchainClick To Tweet
The World Bank issues between US$50-US$60 billion annually in bonds for sustainable development. It has a 70-year track record of innovation in the capital markets. Among its pioneering issuances are the first bond in global format—a globally traded and settled bond issued in September 1989; and the first e-bond, a fully integrated electronic bond issued in January 2000.
“Since our first bond transaction in 1947, innovation and investor satisfaction have been important hallmarks of our success with leveraging capital markets for development.,” commented Arunma Oteh, World Bank Treasurer. “Today, we believe that emerging technologies, equally offer transformative, yet prudent possibilities for us to continue to innovate, respond to investor needs and strengthen markets. We are therefore delighted that after working with our information technology colleagues and the Commonwealth Bank of Australia over several months, that we are now in a position to launch our first blockchain bond transaction. CBA’s commitment and Microsoft’s wealth of experience have been instrumental to achieving this historic milestone.”
Oteh expressed their sincere appreciation to their blockchain bond investors and said it was their “common desire to champion greater efficiency, and transparency as well as more robust issuance processes.”
“Our goal is to continue to harness innovation for the benefit of markets and our mission of ending poverty and boosting shared prosperity.”
Denis Robitaille, World Bank Group Chief Information Officer, added that helping countries transistion to tech led development is key to reducing poverty and encouraging sustainable development.
“This is at the heart of the World Bank’s Innovation Lab—and this pioneering bond is a milestone in our efforts to learn how we can advise our client countries on the opportunities and risk that disruptive technologies offer as we strive to achieve the Sustainable Development Goals.”
The bond-i blockchain platform was built and developed by the CBA Blockchain Centre of Excellence. Sophie Gilder, Head of Blockchain, Innovation Labs at the CBA said they know blockchain has the potential to revolutionize financial services and markets, and this transaction is a significant step towards that future state.
“By working collaboratively with the World Bank, we were able to find solutions to technical and legal considerations to make this ground-breaking transaction a reality. This project further solidifies CBA’s position at the forefront of blockchain technology and we are excited to build on this, in partnership with our clients.”
World Bank infrastructure for the bond will run in Washington, D.C. on the Microsoft Azure cloud computing platform. Microsoft validated the system’s operational capabilities, security and scale.
The law firm of King & Wood Mallesons acted as deal counsel on the bond issuance and advised on the legal architecture for its implementation.