CBA & World Bank deliver blockchain breakthrough in bonds trading
The Commonwealth Bank, in partnership with the World Bank, has announced it has executed the world’s first debt bond trade through blockchain.
Co-developed by CBA’s Blockchain Centre of Excellence, the World Bank and Canadian investment bank TD Securities, the distributed ledger operated debt instrument, taking on the suitably Australia name bond-i, is the world's first bond to be created, allocated, transferred, and managed through its lifecycle using blockchain technology.
As the first successful DLT bond issuance, it marks an important milestone for blockchain-backed trading, seen as a vital next step in transitioning bonds trading from its longstanding, and inefficient, reconciliation process and giving stakeholders – both issuers and investors – a synchronised, real-time ledger of ownership.
Among the first investors in the bond, first issued in August last year, included CBA, First State Super, NSW Treasury Corporation, Northern Trust, QBE, SAFA, and Treasury Corporation of Victoria. The bond raised $110 million just two weeks after its launch in August 2018.
The successful completion of a secondary transaction with trading activity recorded on blockchain “illustrates the vast potential to enhance the coordination of securities trading and management on blockchain – delivering a verified, permanent record and instant reconciliation,” CBA said in a statement.
“Enabling secondary trading recorded on the blockchain is a tremendous step forward towards enabling capital markets to leverage distributed ledger technologies for faster, more efficient, and more secure transactions,” said World Bank Vice President and Treasurer Jingdong Hua.
Sophie Gilder, Head of Experimentation & Commercialisation, at CBA’s Innovation Labs said blockchain technology “can deliver a superior digital market for raising capital and then managing and trading securities.”
“Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight,” she said.
Bond-I was built on top of private blockchain network on the Ethereum platform, with the ledger split between nodes running in Sydney and Washington D.C. – headquarters for the World Bank. The Washington-based global development bank will host the system on a Microsoft Azure cloud.
The World Bank issues between US$50-US$60 billion annually in bonds for sustainable development as part of its mandate to reduce poverty and promote lasting development.
CBA is not alone in testing the blockchain-based systems for bond issuance, with both Santander and Societe Generale exploring potential DLT use-cases.