The World Bank Group's International Bank for Reconstruction and Development (IBRD), rated Aaa/AAA, has raised an additional A$50 million ($34 million) for its Kangaroo bond due in August 2020.
This is the first bond created, allocated, transferred, and managed through its life-cycle using distributed ledger (blockchain) technology.
The successful tap expands market participation with the Bond-i platform combining three joint lead managers, that being the Commonwealth Bank of Australia (CBA), RBC Capital Markets (RBC) and TD Securities (TD). It brings together new market participants, including an offshore investor, and the existing investor community including ongoing support and input from TCorp (NSW Treasury Co
In August 2018, CBA was mandated by the World Bank as arranger for the bond and following a two-week consultation period with the market, the two-year bond raised A$110 million.
In May 2019, CBA and the World Bank, with TD acting as market maker, added additional capability to the platform by enabling secondary bond trading recorded on Blockchain making this the first bond whose issuance and trading are recorded using distributed ledger technologies.
The subsequent issuance builds on the success of the platform and further enables capital markets to leverage distributed ledger technologies for faster, more efficient, and more secure transactions.
Bond-i is part of a broader strategic focus of the World Bank to harness the potential of disruptive technologies for development to benefit the World Bank’s clients.
Blockchain innovation lab
The World Bank’s blockchain innovation lab was established in 2017 as an innovation hub for poverty reduction projects across the world and includes developing opportunities to use blockchain and other disruptive technologies in areas such as land administration, supply chain management, health, education, cross-border payments, and carbon market trading.
“We are happy to see the continued, strong support and collaboration from investors and partners. The World Bank’s innovation and experience in the capital markets is key to working with our member countries to increase digitisation to boost productivity in their economies and accelerate progress towards the Sustainable Development Goals,” said
James Wall, the executive general manager International at Commonwealth Bank, also commented: “The tap is an important milestone in demonstrating the full lifecycle management of an issuer’s capital market’s needs. It is also a significant step for the platform bringing on additional participants and demonstrating the broader potential of Bond-i as a capital markets platform.”
Debt capital markets today comprise numerous interconnected intermediaries and agents undertaking intersecting roles for markets to function.
Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, as well as enhance regulatory oversight.
“CBA now has tangible evidence from our first bond offering using blockchain technology and subsequent bond management, secondary trading and tap issue via the same platform, that blockchain technology can deliver a new level of efficiency, transparency and risk management capability versus the existing market infrastructure,” said Sophie Gilder,
Gilder added: “Next we intend to deliver additional functionality to deliver greater efficiencies in settlement, custody and regulatory compliance.”