Big banks want to issue new blockchain bond on Ethereum, but there’s a catch


Even the goddamn World Financial institution isn’t immune to blockchain hype: it has mandated that the first ever bond be issued via blockchain.

The Commonwealth Bank of Australia (CBA) will be issuing what’s being called “the Kangaroo bond.” Bonds are used by businesses to raise capital – when investors buy them, they are essentially loaning money directly to the issuer. The debt is repaid over time, typically with a bunch of extra dividends.

To set it apart from the traditional concept, the banks are calling their spin on it ‘bond-i’ – an acronym that stands for “blockchain operated new debt instrument.”

“Blockchain has the potential to streamline processes among numerous debt capital market intermediaries and agents,” a joint press release reads. “This will help simplify elevating capital and buying and selling securities, enhance operational efficiencies, and improve regulatory oversight.” 

The bonds will probably be “created, allotted, transferred and, managed” by way of a non-public, Ethereum-based blockchain. Its infrastructure is to be dealt with by way of Microsoft’s Azure cloud computing system by means of an information heart in Washington DC.

The language right here is essential. Leveraging options like Azure and knowledge facilities suggests the present implementation of bond-i most likely isn’t fully decentralized – a development usually frowned upon in blockchain circles.

Certainly, criticism geared toward half-assed blockchain options usually focuses on the truth that utilizing centralized infrastructures creates single factors of failure inside such programs.

This has actually been unchartered territory till now – regardless of it being an apparent software of the expertise. It’s just about on development for CBA, too. Simply final week they introduced they’d employed using a distributed ledger to ship a bunch of almonds to Germany.

Whereas CBA says curiosity within the bonds has been “robust,” there’s actually no option to inform simply but. There’s additionally a sure irony within the World Financial institution demanding debt be managed through blockchain, contemplating we have been meant to be freed of it through cryptocurrency.

Yep, it’s nice that companies are utilizing blockchain, however we’re nonetheless but to see proof the expertise can actually work on a business scale. Misuse of the expertise by way of a foul implementation might set the trade again significantly – particularly with monetary devices corresponding to bonds in play.

Printed August 10, 2018 — 10:30 UTC

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