The World Bank decompresses the launch of the "BONDI" bond with the Australian CBA


It's been almost 10 years since Bitcoin was born and, at that time, the major financial institutions have slowly become familiar with blockchain technology and cryptocurrencies.

Some have taken the sector faster than others, and some outright have turned their backs on the idea of ​​using or investing in cryptocurrencies.

However, the technology behind these decentralized digital currencies has been an important focal point, mainly in terms of how it can be used by traditional banking and financial institutions. [19659002] Numerous big name financial companies have actively developed blockchain-based systems used for different operations. JPMorgan's Quorum platform works on the Ethereum blockchain and allows companies to process private transactions within a small group of participants.

While that project has garnered a lot of attention from traditional media, the applications of distributed ledger technology extend to multiple sectors. Therefore, Morgan Stanley took advantage of the blockchain technology to process transactions and backup internal data. The advantages of the technology have also been used by global audit firms such as PwC, Deloitte and KPMG.

In August, the World Bank announced that it was launching the first blockchain-based bond through the Commonwealth Bank of Australia (CBA). The project is called "Bondi" (Blockchain Operated New Debt Instrument), which could also refer to the famous Bondi Beach in Sydney.

The bond was officially issued and the $ 73 million deal sees two-year contracts that will be established on August 28th. The CBA says that the agreement will produce a return of 2.2%.

The move is the latest and most significant of a global banking company, as it marks a shift towards the use and understanding of the possibilities of blockchain systems.

In an exclusive interview with Cointelegraph, Paul Snaith of the World Bank, who is in charge of treasury operations, bank capital markets and payments, gave an insight into the path taken to exploit blockchain technology at the institution, as well as the reflections of the World Bank on cryptocurrencies:

Why blockchain, why Commonwealth Bank of Australia?

Cointelegraph: How long has this blockchain-based bond been developing and why the Commonwealth Bank of A ustralia in particular has been chosen to develop this platform

Paul Snaith: We started to consider that in August 2017, and after a while, we established the formal agreement with CBA in January 2018. [19659002] There are three areas that are significant. At the first level, there is a very positive environment that feeds the fintech blockchain. We think that all levels of the Australian government are interested in all these technologies and we think that regulators are interested in what is happening.

I think the example we used is that the Australian stock exchange chose individual equity positions to replace their net settlement system in 2016. In a significant market such as Australia, the settlement system equity and the main market infrastructures are a powerful indication to understand the advantages of technology and government support, ie at government regulation level.

CBA, they are innovative. We have worked with them for a long time. We have been aware of their prototype transactions, which they have been doing since January 2017. <...> We are aware of having a significant business commitment to innovation and understand that this type of technology is both a threat and a & # 39; opportunities in every branch of business they have. That's why they have the innovation lab in Hong Kong, one in Sydney and one in London. We recognize them as innovative.

Finally, the market: the World Bank has issued debts in Australia for a long time. We have been reactive to the Australian market and investors are familiar with our name. It's a very convenient place for us to do business. Whether at the regulatory level, or at the level of innovation or market level in which our name is used, it is positive all round.

Cointelegraph: was there any other country that you could have considered or any other field you might have considered to move this project forward?

PS: We had some preliminary conversations with various technology companies in the second half of 2017, but none resounded in the complete sense that I gave you for Australia. We use the term "content" – its most contained market with positive opinions towards our partner, with innovation and regulation.

World Bank and Cryptocurrency

PS: The bank is considering developing an official line to this effect, and we do not have one at this time. But inside this context, we have had internal conversations about this.

The fundamental thing is with cryptocurrencies that use proof of work, and therefore a considerable use of energy and energy to establish consensus – we are primarily a development agency and we take a deep concern about development issues – including carbon dioxide emissions and energy generation, which contributes to global warming, etc.

We are a little bothered by the energy consumption associated with proof of work, for example. We are an official organization owned by over 190 countries, so the AML and CFTC rules are very important to us, and there are still doubts about AML and CFTC with the use of cryptography. And we think it's important not to associate with this until we have a clear picture to do it. These are some of the reasons why we will not do it at the moment.

We tried to use a cryptographic token for settlement on this bond transaction – but we chose not to – primarily to de-risk the transaction a little bit. to allow the familiarity of all our investors regarding the cash side of the transactions.

Making sure that investors enter a large transaction like this means we offer them comfort. They are certainly comforted by our name: we operate in a large market and we are classified as AAA. But there is a new technology behind it, so it is important that we risk zeroing the transaction on the part of the cash payment.

We are very, very interested in how that part of the equation will develop and we will continue to look at it. We have no generic opposition to what I have described. We have grouped these technologies both on the transfer of securities in a register and on the exchange of ownership of the piece in cash, so both of these problems will be solved in the long term, which will reform these markets and make them much faster.

Bonds based on blockchain and banking sector

PS: We are a big name in this market and hopefully it will attract attention. I think you already know great actors in international markets who are already doing some activities and explorations. We mentioned the stock exchange of Australia, which is fundamental: we have not yet seen large infrastructure projects in other areas, but much research has been done in places like Singapore, Canada and elsewhere. We hope this can give a boost in that direction.

Finally, we are primarily a development organization. This transaction really helps us to learn. We have always been innovative in the capital markets. We hope to deepen our understanding of the impact of this technology on capital markets, and we certainly do not look forward to exploring for other means of transferring value. We believe there is considerable promise for these technologies to help that part of the world that is currently without an envelope or has little access to financial services.

We have a profound interest in seeing how these technologies can be applied for the benefit of the poorest in the world, and this is a focal point as an institution.

This interview has been modified and condensed.

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