The World Bank has launched the world’s first BONDI, or ‘blockchain operated new debt instrument’, which it claims is the ‘first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology’.
It hopes its use of blockchain tech will reduce friction in the bond creation, sale and management process and will cut the costs of bond issuance.
Global law firm King & Wood Mallesons acted as deal counsel on the bond issue and advised on the legal architecture for its implementation.
The two-year bond raised A$110 million, marking the first time that investors have supported the World Bank’s development activities in a transaction that is fully managed using blockchain technology, the bank added. The World Bank mandated the Commonwealth Bank of Australia (CBA) as arranger for the bond.
The World Bank infrastructure for the bond will run in Washington, DC, on the Microsoft Azure cloud computing platform, and is using a private Ethereum blockchain, it is understood. Microsoft said it validated the system’s operational capabilities, security and scale. It is also understood that it still made use of the traditional SWIFT global financial payments system used for normal fiat currency transactions, as opposed to taking a cryptocurrency approach.
In June 2017, the World Bank launched a Blockchain Innovation Lab to understand the impact of blockchain and other technologies in areas such as land administration, supply chain management, health, education, cross-border payments, and carbon market trading.
Arunma Oteh, World Bank Treasurer, said: ‘I am delighted that this pioneer bond transaction using the distributed ledger technology, BONDI, was extremely well received by investors. We are particularly impressed with the breath of interest from official institutions, fund managers, government institutions, and banks. We were no doubt successful in moving from concept to reality because these high-quality investors understood the value of leveraging technology for innovation in capital markets.’