The World Bank has endorsed the Commonwealth Bank of Australia as the sole arranger of the world’s first blockchain bond. The development comes in response to strong investor interest in bond-i (blockchain offered new debt instrument) technology, and is expected to launch following consultation with a wider investment group.
Labelled ‘$AUD Kangaroo bond’, the new technology seeks to utilise blockchain technology to create, allocate, transfer ownership and manage live bond deals. By affording an automated process for buying and transferring security ownership, the technology promises to create efficiencies for issuers and investors. In doing so, it simplifies the transaction process by removing the need for reconciliation of data between different IT systems, thus enabling all parties to rely on a synchronised ledger showing ownership in real time.
The World Bank has championed blockchain for streamlining processes among debt capital market intermediaries and agents, declaring that it will enhance regulatory oversight, improve operational efficiencies and simplify raising capital and trading securities. It marks the first time globally that a legally binding bond will be created, allocated, transferred and managed through its life cycle solely using distributed ledger technology.
However, the new bond will not fully embrace blockchain technology. Instead, in order to avoid Australia’s 10% goods and services tax on fiat-currency-linked tokens, payments will be made via the existing SWIFT system.
The transaction is estimated to raise between $50 million and $100 million and is expected to launch from the World Bank’s existing global debt issuance facility in the coming weeks. We are excited to watch as Australia leads the way in implementing this world class technology and are eager to see how global bonds progress following its launch.
