The World Bank has utilized blockchain technology to raise over $33 million for its August 2020 Kangaroo bond, claiming that this is the first time in which a bond has been created, allocated, transferred, and managed through its entire life cycle using distributed ledger technology (DLT). The process utilized the World Bank’s in-house blockchain platform, and allows for faster, cheaper, and more secure transactions.
Kangaroo Bonds Bounce onto the Blockchain
The World Bank’s Kangaroo bonds, which are bonds issued in Australian dollars by foreign institutions, have picked up increased attention recently due to “strong investor demand for safe haven assets”, as evidenced by the 2024 Kangaroo bond recently increasing to AUD 2.1 billion ($1.4 billion). The World Bank launched the Blockchain Operated New Debt Instrument (Bondi) bond, the first of its kind, in August last year in a AUD 100 million ($67.75 million) deal designed to test how the new technology might improve the decades-old bond sales structure. James Wall, Executive General Manager at Commonwealth Bank of Australia, the sole manager of the bond, explained to Reuters at the time that what the potential benefits of blockchain-issued bonds could be:
You’re collapsing a traditional bond issuance from a manual bookbuild process and allocation process, an extended settlement then a registrar and a custodian, into something that could happen online instantaneously.
Australian Securities Eye Blockchain Switch
Australia isn’t the first country in the world to dip their toe in the blockchain bond waters however. Earlier in 2018 Russian telecoms operator MTS and Sberbank issued the world’s first blockchain bond. The 182-day deal was however privately placed, rather than being offered for wider auction, as is the case with the World Bank deal. The World Bank’s desire to press ahead with blockchain-offered bonds comes as the Australian Securities Exchange plans to switch to DLT in 2020 in order to help cut the costs of clearing and settling equities.