Money & Markets

World Bank partners with CBA to issue a bond on the Ethereum blockchain

(Ronald C. Modra / Getty Images)

Commonwealth Bank has been chosen by the World Bank to be the lead arranger on a bond instrument that will be created using blockchain technology.

The so-called Kangaroo bond will be denominated in Australian dollars, and classified as a “bond-i” — Blockchain Offered New Debt Instrument.

The bond issuance will be carried out using a private Ethereum blockchain, CBA said.

“Ethereum currently has the largest and most active development community globally, and offers the functionality we require,” the bank said.

“However, other blockchains are developing rapidly and CBA remains open to other options in the future.”

The bond will be AAA rated, and used to raise capital for the World Bank’s Reconstruction and Development division.

A spokesperson for CBA told Business Insider the bond was expected to raise between $50-$100 million.

“We know blockchain has the potential to revolutionise financial services and markets, and this transaction is a significant step towards that future state,” said Sophie Gilder, Head of Blockchain at CBA.

“By working collaboratively with the World Bank, we were able to find solutions to technical and legal considerations to make this ground breaking transaction a reality.”

CBA also recently partnered with a range of logistics companies to use blockchain to track a shipment of agricultural goods from source in Victoria to their destination in Germany. Documentation, location, and environmental conditions were tracked in real-time along the entire route.

An independent review of CBA’s blockchain platform was carried out by Microsoft, to test functionality and security.

Law firm King & Wood Mallesons advised on the legal framework for the bond issue. Other collaborators in the bond-i project included Northern Trust, QBE and Treasury Corporation of Victoria.

“Debt capital markets today comprise numerous interconnected intermediaries and agents undertaking intersecting roles for markets to function,” CBA said.

“Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight.”

The World Bank issues around $US50-$60 billion worth of bonds annually to to fund projects for sustainable development.

“After a year of working with Commonwealth Bank of Australia, we are in a position to launch our first blockchain bond transaction,” said World Bank Treasurer Arunma Oteh.

“Our sincere appreciation to our pioneer blockchain bond investors, who are partnering with us on this transaction because of our common desire to strengthen markets and enable more robust issuance processes.”

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