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In what is called world premiere, the World Bank has ordered the creation of a blockchain-based bond through the Australian Commonwealth Bank (CBA).
Indicates a very clear move by some of the world's most influential financial institutions to start exploiting blockchain technology to improve their offers.
CBA has already developed the blockchain-based system, using a private Ethereum blockchain. The Blockchain Offer New Debt Instrument (bond-i) will be issued by the World Bank in Washington.
The project was led by the World Bank, which is trying to use blockchain technology to improve the way it emits links around the world.
Today we create history by creating the first global blockchain bond. The World Bank has mandated the Commonwealth Bank of Australia as the only arranger for bond-i, the first global link to use distributed ledger technology.
Further information: https://t.co/tieQoQ9uLe #blockchain [19659007] #bond pic.twitter.com/LhEu4oKR37
– The World Bank Treasury (@Treasury_WB) August 9, 2018
The institution issues about $ 60 billion in bonds annually for sustainable development – and the bank says the move aims to explore the use of blockchain technology through various operations.
The bond-i was designed and developed exclusively by CBA Innovation Lab's Blockchain Center for Excellence. The department had already tested a blockchain bond prototype in 2017 in partnership with Queensland Treasury.
Although this could be the first bond issued through blockchain technology, it is not the first debt instrument. The Spanish banking group BBVA signed a blockchain loan worth $ 117 million in July, hoping to take advantage of the transparency and traceability offered by the contract. This happened a few months after his first "global corporate loan transaction" in April.
A notch in the hat of Ethereum?
What is particularly exciting about the move is the use of a private Ethereum blockchain that will allow the creation and management of the bonds
The development team used a law firm as an advisor for the issue of bonds on the platform, in addition to the advice provided for the legal architecture of the smart contracts that will regulate the bond. [19659002] In addition, the platform has been individually reviewed by Microsoft, its architecture, security and resilience, giving a further advantage to the credibility of the project as a whole.
CBA has stated that it is also possible to explore the use of other blockchain platforms, while stating that the Ethereum protocol provides the functionality needed to power the project.
Matthew Di Ferrante, an independent developer who worked for the Ethereum Foundation, told Coin telegraph the move is a first elementary step for the banking world and its use of blockchain applications.
"I think it's a good first example: financial instruments like bonds are easily converted into blockchain / smart contracts, but it's not the only one and the point of arrival even for traditional financial institutions. it will come when many different institutions and industries will use all the * compatible * blocks.
While the move is undoubtedly a step in the right direction, Di Ferrante points to one of the fundamental principles of blockchain technology: decentralization. missing in the project, which removes the transparency from the equation:
"It's nice to see that, at least in this case, it seems that the CBA system installed will be co-managed by the World Bank, giving it some decentralization , but I would like to see more transparent and more distributed projects even for private blockchains.
Blockchain Vs. cryptocurrency
The World Bank and CBA are actively exploiting the blockchain technology, but completely devoid of any talk about cryptocurrencies. It is fair to say that the main financial institutions have come to separate the cryptocurrency from the blockchain, with the first view as an unnecessary by-product of the technology.
The true measure of the adoption of cryptocurrency will be evident when their uses and accessibility are equal to digital coupons. For the time being, many financial institutions maintain indifference towards cryptocurrencies, while extolling the virtues of blockchain.
A prime example is JPMorgan CEO Chase, Jamie Dimon, who made it clear that his company will use blockchain technology for a number of projects. They went as far as patenting for peer-to-peer systems, blockchain to facilitate payments between banks.
In February, JPMorgan told the US Securities and Exchange Commission that cryptocurrencies were "competition" and "risk" to its business. This could be a prime example of apathy towards cryptocurrencies that still prevail in the world of finance.
Why CBA, Why Australia?
It is not exactly clear why the World Bank chose the Commonwealth Bank as a pioneer of this project, but the Australian Bank's Blockchain Center for Excellence seems to have been a factor.
As mentioned earlier, the CBA Innovation Lab was responsible for a previous blockchain-based bond prototype, which could have influenced why the CBA was chosen to run with development.
In July, the bank completed an almond trade, sent and tracked by a blockchain platform, from Australia to Germany.
The platform leveraged the blockchain, the Internet of Things (IoT) and smart contracts to provide a number of stakeholders with a plethora of information for shipping 17-tonne dice.
CBA said the platform was targeted at three areas of global trade, operations, documentation and finance. Users would have access to container information, activity tracking and documentation through the blockchain platform.
Nicholas Merten, founder of the Youtube channel Datadash, told Cointelegraph that the CBA has put Australia on the map in terms of early adoption of blockchain: [19659019] "Australia has taken an interesting approach As the banks are hesitant towards cryptocurrencies and that Commonwealth Bank is so eager to explore the blockchain, they have shown an evident feeling towards serving as guardians of this technology in real-world applications. "[19659018] On a more serious note, CBA has been in the spotlight between allegations of violation of the laws against money laundering and terror financing
A sign of future things
This move by the World Bank would not go unnoticed by others financial sector leader, and certainly not the first time we hear about financial institutions trying to use blockchain technology to improve their or offers.
As reported previously by Cointelegraph, some of the world's major banks have closely monitored the blockchain space, as discussed at a 20/20 money conference in June.
Martin Etheridge, head of the Fintech division of the Bank of England, made it clear that the bank was not actively developing its DLT, bu We admitted that they were aware of the potential benefits:
"We recognize that in a distributed system there is the potential for resilience and other benefits of distributed payment systems are those we want to be sure of and that are fully integrated into the work we are currently doing to our infrastructure. "
One of the most embarrassing questions is the reason so the World Bank opted for CBA for this blockchain-based bond, where a country like Switzerland is one of the most liberal when it comes to the adoption of cryptocurrency.
The country saw its banking system challenged by an initiative that hoped to ban the fractional banking reserve in the country. Although the referendum was finally rejected in June, it provided many food for thought.
Switzerland has been a supporter of the use of Bitcoin for some time. Thomas Moser of the Swiss National Bank pointed out the apathy towards the cryptocurrencies of the country:
"Switzerland has been relatively enthusiastic about encrypt.We have a national railway system that has turned automatic ticket machines into Bitcoin ATMs. train station in Switzerland, you can put money in a ticket machine and load a BTC wallet.The cryptocurrencies have been very well tolerated in Switzerland so far. "
In the same conference, most of these bank leaders were convinced that cryptocurrencies would not have challenged traditional legal currencies. However, a strong theme emerged that if people were to lose confidence in traditional currencies and banks, cryptocurrencies could provide an alternative.
As suggested by Merten, the move by the World Bank and CBA demonstrates how blockchain technology can affect financial applications:
"With obsolete legacy systems still clogging up the financial sector, this development could be the bell I warn that banks must realize how big a deal this technology is, I think many institutions are still looking for the killer app they can use for their systems.We have no basis in the world without authorization. this application: money.But once a company can show that the blockchain can be used in private environments and bring a reduction in costs, companies will hasten to follow the example. "[19659018] With the World Bank moving forward to take advantage of blockchain technology to overhaul current systems, it is only a matter of time before other major banks follow or the example
Cointelegraph has contacted both the World Bank and the CBA to comment on the reasoning behind the partnership – and this article will be updated accordingly.
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