The Commonwealth Bank of Australia (CBA) and the International Bank for Reconstruction and Development (World Bank) have enabled secondary market trading recorded on blockchain for bond-i (blockchain-operated new debt instrument), making it the first bond whose issuance and trading are recorded using distributed ledger technologies.
The functionality was developed by CBA in conjunction with World Bank and market maker TD Securities, with the platform built and developed by the CBA Blockchain Centre of Excellence, housed in the Sydney Innovation Lab.
According to CBA, the successful completion of the blockchain-recorded transaction illustrates the “vast potential” to enhance the coordination of securities trading and management on blockchain, which delivers a verified, permanent record and instant reconciliation.
The World Bank issued bond-i in August 2018, which was the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology, with CBA the sole arranger for the bond.
World Bank vice president and treasurer Jingdong Hua commented: “Enabling secondary trading recorded on the blockchain is a tremendous step forward towards enabling capital markets to leverage distributed ledger technologies for faster, more efficient and more secure transactions.
“It speaks to the innovation and commitment of all our partners, including investors, that we were able to achieve this together.”
Sophie Gilder, head of experimentation and commercialisation, CBA Innovation Labs, added: “Since issuing bond-i in August last year, the positive feedback and interest from the technology and financial sector community globally has been extraordinary.
“There is a growing recognition that blockchain technology can deliver a superior digital market for raising capital and then managing and trading securities, so we are working with our strategic partners to realise that vision.
“Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight.”
The bond-i project is part of a broader strategic focus of the World Bank to harness the potential of disruptive technologies for development.
The project is advised by King & Wood Mallesons as legal counsel and benefits from an independent code review by Microsoft. IHS Markit provides independent valuations.