Public Investors Flock to First Blockchain Bond, Raising $80 Million

The World Bank has become the Indiana Jones of blockchain in the financial industry, having blazed a new trail with a new debt instrument using distributed ledger technology.  A bond transaction mandated by the World Bank, which tapped the Commonwealth Bank of Australia (CBA) as the sole manager, has raised $80.48 million reportedly across seven investors — including the CBA — entirely on the blockchain.

‘Bond-i’, which stands for Blockchain Operated New Debt Instrument,  was “created, allocated and transferred using blockchain technology,” according to the Aussie bank. To mark the occasion and the role of the Australian bank in this groundbreaking product, bond-i also cleverly extends a nod to Australia’s Bondi Beach.

The World Bank and CBA turned to the blockchain to prove the efficiencies that embracing technological innovation like the blockchain can create. They are not threatened by the blockchain and recognize that it can help them with their ultimate goal, which is to eradicate poverty. Automating financial transactions on the blockchain creates a more efficient system and slashes costs and time associated with traditional bond issuance. Who knows where the success of this bond sale could lead considering the World Bank issues up to $60 billion in sustainable development bonds each year.

James Wall, the CBA’s executive general manager, characterized the response to Bond-i as “overwhelming.” according to Reuters. The public investors are comprised of “official institutions, fund managers, government institutions, and banks,” including the following:

  • CBA
  • First State Super
  • NSW Treasury Corporation
  • Northern Trust
  • QBE
  • SAFA
  • Treasury Corporation of Victoria.

Arunma Oteh, the World Bank Treasurer, said in a statement:

“We are particularly impressed with the breadth of interest from official institutions… these high-quality investors understood the value of leveraging technology for innovation in capital markets.”

Oteh also acknowledged other businesses that supported the deal, including “King & Wood Mallesons, IHS Markit, Microsoft and Toronto Dominion Securities.” Incidentally, Microsoft’s Azure Cloud technology helped a UK fintech dubbed Nivaura create blockchain-fueled Principal Protected Notes tied to the FTSE 100 index. The products were settled both with the Ethereum blockchain as well as via “traditional clearing infrastructure,” while bond-i was “fully managed” on the blockchain.

Bond-i’s issuance, for which investors are welcome throughout the bond’s life cycle, didn’t happen overnight and required a two-week canvassing to gauge investor appetite, which proved to be robust. The issuer’s creditworthiness is extremely high quality, as the World Bank boasts bonds with a triple-A rating attached.

There have been variations of bond issuance on the blockchain before, but the bond-i is in the records books as the maiden “global blockchain bond” for its complete dependence on the blockchain and its ability to attract public investors.

Featured image courtesy of Shutterstock.

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.