By Byron Connolly
Jan. 26, 2017
Commonwealth Bank (CBA) and Queensland Treasury Corporation have created what they claim is the first government bond using the blockchain.
CBA on Wednesday said it had issued a cryptobond for Queensland Treasury Corporation (QTC) using its capital markets blockchain platform. The bank said the transaction marks the first trial of its private, permissioned blockchain platform for end-to-end issuance of bonds.
QTC used the blockchain to generate a bond tender, view investor bids in real time, finalise investment allocation and settle instantly with investors. The treasury acted in both the issuer and investor role to test the process for issuance.
The QTC bond was created in digital form using smart contract technology and can automatically pay coupons to the current holder when due. The bond is a working prototype, is not tradable and does not carry any debt obligation.
CBA’s blockchain team created the prototype in the bank’s Innovation Lab in conjunction with the Institutional Banking and Markets debt markets team and its clients.
The bank said the use of a decentralised digital ledger for a bond streamlines the issuance process, optimising the transparency of price and demand during the bond’s bookbuilding process.
The blockchain also simplifies the bond settlement process by acting as both the bond register and payment platform, consolidating the investor’s payment and the issuers’ title transfers into single, instant transactions, CBA said.
CBA’s executive general manager of business and corporate finance, George Confos, said in a statement: “Our proof-of-concept demonstrates blockchain is capable of delivering efficiency to issuers, investors and other market participants.
“Blockchain makes it possible to increase efficiency and transparency, which will redefine how capital markets operate. We will continue to collaborate and work with clients, financial institutions and consortiums like R3, as well as with market participants, to understand the opportunities and real life applications of innovative and emerging technologies.”
In October last year, CBA, Wells Fargo and Brighann Cotton completed the first global trade between two independent banks using blockchain and smart contract technologies.