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The World Bank is Preparing For the World's First Blockchain Bond (cnbc.com)

Posted by msmash on from the moving-forward dept.

The World Bank has mandated Commonwealth Bank of Australia to arrange the world's first blockchain bond. From a report: The Kangaroo bond, referring to foreign bonds issued in Australia in the local currency, has been named bond-i, an acronym standing for Blockchain Offered New Debt Instrument. (It's also a reference to Bondi Beach, an iconic spot in Sydney.) According to the institution, the bond will be the first in the world to be created, allocated, transferred and managed with blockchain technology. That tech, which underpins cryptocurrencies like bitcoin, refers to the distributed ledger technology that securely records all transactions made on the chain. "Blockchain has the potential to streamline processes among numerous debt capital market intermediaries and agents. This can help simplify raising capital and trading securities; improve operational efficiencies; and enhance regulatory oversight," a joint release from the two organizations said.

36 comments

  1. bloackchain blockchain by Anonymous Coward · · Score: 5, Insightful

    We need to move now. Our competitors already vertically integrate granular paradigms. At the end of the day, the marketplace has changed. Tee up strategically or dialog. If we circle back, we will unfortunately be lagging in world-class passion. Our enterprise center is focused on new ways to gamify the consumer space through vertical deployments of traction.

    1. Re:bloackchain blockchain by Anonymous Coward · · Score: 0

      And by encapsulating the synergies, and demonstrating leadership courage, we can become a market leader in this promising new market.

      Our brand position and overall market goodwill should give us a leg up this quarter, giving us an opportunity to differentiate our product offerings ... by jumping on the sofa and yelling "blockchain".

      We expect this strategy to give us a rate of return beyond that of standard financial vehicles, and we can be assured the chance to extricate funding from the suckers, er, consumers.

      This game never gets old. :-P

    2. Re:bloackchain blockchain by Anonymous Coward · · Score: 0

      We need to proactively implement cutting-edge supply chains and interactive benchmark high-quality platforms which will quickly leverage other's scalable technology.

      They conveniently mesh B2C process improvements with collaboratively e-enable enterprise mindshare to gain an advantage.

    3. Re:bloackchain blockchain by edi_guy · · Score: 1
      You sirs, have bright futures ahead of you in the boardroom.

      On a more serious note, while I have seen all the pyscho-babble similar to what's been quoted, "...thepotential to streamline processes among numerous debt capital market intermediaries and agents....blah, blah" Literally I have never seen, in any scenario, where the presenter explains how blockchain will do these things.

    4. Re:bloackchain blockchain by sysrammer · · Score: 1

      You sirs, have bright futures ahead of you in the boardroom.

      Yeah. My bullshit bingo card exploded.

      --
      His ignorance covered the whole earth like a blanket, and there was hardly a hole in it anywhere. - Mark Twain
    5. Re:bloackchain blockchain by Anonymous Coward · · Score: 0

      the marketplace has changed

      not merely changed but disrupted

  2. ..it's a world bank bond of course they mandated.. by ole_timer · · Score: 1

    ...doh...

    --
    nothing to see here - move along
  3. Blockchain poop by Anonymous Coward · · Score: 0

    I issued the world's first blockchain poop this morning. Blockchain has the potential to transform pooping...

    Even taking the piss out of this story is boring.

  4. Bond, Blockchain Bond by Anonymous Coward · · Score: 0

    Hashed, not altered.

  5. trump can just get an block chain bail bond by Joe_Dragon · · Score: 0

    trump can just get an block chain bail bond

    1. Re:trump can just get an block chain bail bond by jpaine619 · · Score: 1

      Ever have an original thought?

  6. Good luck with that. by Anonymous Coward · · Score: 0

    Most buyers who purchase fixed income securities do it for the "fixed" part. i.e. you get a steady, lower-risk stream of income. A new unknown, potentially highly fluctuating instrument (based on the variability and fraud rates for cryptocurrencies) is the opposite of that. Sure, in theory blockchain makes things safer, but given the massive amount of fraud and manipulation we still see on cryptocurrency markets, it's not likely that blockchain bonds won't see similar concerns.

    Sure, some people buy bonds (junk bonds are definitely a thing). But that's because they carry a very high rate of return, which is another way of saying they're very expensive to issue (they carry a high interest premium to compensate bondholders for risk, which means the borrower gets a less favorable deal).

    I expect cryptobonds, for the short and medium term future, will carry additional risk premium to conventional bonds. i.e. for an issuer with the same credit rating, borrowers would demand more interest ona cryptobond, to insulate them from possible risks in the platform.

    If you wanted to raise capital, who on earth would issue a bond with an additional, avoidable risk premium that the borrower has to eat, rather than issue a conventional bond?

    1. Re:Good luck with that. by Anonymous Coward · · Score: 0

      If you wanted to raise capital, who on earth would issue a bond with an additional, avoidable risk premium that the borrower has to eat, rather than issue a conventional bond?

      You mean who would agree to unfavorable debt terms? Have you met humanity?

    2. Re: Good luck with that. by Anonymous Coward · · Score: 0

      Have you met bond issuers? Theyâ(TM)re large corporations advised by teams of lawyers and investment bankers whose job is to help them raise capital in quantity on the most favorable terms possible.

      Weâ(TM)re not talking about the same people who frequent payday loan lenders.

    3. Re:Good luck with that. by alexander_686 · · Score: 1

      Most buyers who purchase fixed income securities do it for the "fixed" part. i.e. you get a steady, lower-risk stream of income. A new unknown, potentially highly fluctuating instrument (based on the variability and fraud rates for cryptocurrencies) is the opposite of that.

      I don't think this is true. The bond pays in Australian Dollars, a nice stable currency. I believe the point of the bond is that it can be traded off the exchanges and be self settling, without the need for a transfer agent. .

    4. Re:Good luck with that. by ceoyoyo · · Score: 1

      I don't think this is supposed to be a currency like bitcoin. They're proposing using a blockchain to record bond trading transactions.

      I think central authorities using blockchain distributed databases like this is stupid, and potentially dangerous, but hey, buzzwords.

    5. Re:Good luck with that. by Anonymous Coward · · Score: 0

      WHY?

      Why do they need to record bond trade transactions via a blockchain?

      Blockchains are something that is 100% under the control of those that created it. It will enslave you.

    6. Re:Good luck with that. by ceoyoyo · · Score: 1

      The core of a blockchain, a hash tree, is actually a pretty useful way of recording things like transactions. Git uses it, for example. I'm sure any kind of accounting process could benefit from the integrity checking and error detection it provides. It's not particularly revolutionary, but accountants are reasonably conservative.

      Making that record public... okaaaay. Making it modifiable by the public, which is what "blockchain" really adds... what could possibly go wrong?

    7. Re:Good luck with that. by godel_56 · · Score: 1

      Most buyers who purchase fixed income securities do it for the "fixed" part. i.e. you get a steady, lower-risk stream of income. A new unknown, potentially highly fluctuating instrument (based on the variability and fraud rates for cryptocurrencies) is the opposite of that.

      Very large bonds in international currencies tend to be of the zero coupon variety,. That is, they don't pay any interest as they go along but pay out the full face value on completion. The buyer gets a profit from buying them at a discount to face value at the beginning, meaning they may be able to class the profit as capital gains when they finally sell them. YMMV.

    8. Re:Good luck with that. by jythie · · Score: 1

      hrm. One use case I could see is the work of updating the blockchain being split between multiple companies/institutions that need to work together but do not trust each other.

    9. Re:Good luck with that. by ceoyoyo · · Score: 1

      How would you handle that? Proof of work? Whichever company is willing to devote the most compute time wins? Proof of stake? Biggest one takes all?

      When two companies don't trust each other, you get them both to approve all transactions.

    10. Re:Good luck with that. by jythie · · Score: 1

      It would indeed have to be proof of work, but since institutions could see how much work each one is putting in and who is doing what, they could at least watch out for it. If nothing else, blockchains tend to be a good technology for implementing audit trails And yeah, when two companies do not trust each other, mutual approval works well. But if you are dealing with, say, 1000 entities then things like quorums make more sense, which blockchain as a technology can be used to implement.

  7. Huh? by Impy+the+Impiuos+Imp · · Score: 1

    So instead of mining coins, you're mining shares of this bond?

    --
    (-1: Post disagrees with my already-settled worldview) is not a valid mod option.
    1. Re:Huh? by jythie · · Score: 1

      I suspect they are not offloading it onto random miners, but instead it is being done by serveres controlled by the exchanges or banks.

    2. Re:Huh? by Pseudonym · · Score: 1

      In which case, why isn't this "trusted third party" in disguise?

      The benefit of blockchain is supposed to be that it's tamper proof because everyone is constantly validating it in the open, something that can only happen if everyone has a chance of a reward for doing it.

      --
      sub f{($f)=@_;print"$f(q{$f});";}f(q{sub f{($f)=@_;print"$f(q{$f});";}f});
    3. Re:Huh? by jythie · · Score: 1

      It is pretty much still the 'trusted 3rd party in disguise', but with one exception : the workload could be spread out between multiple institutions/exchanges that do not trust each other. So it would not change anything for the end trader, but could remove the need for a 'everyone trusts' arbitrator between banks.

    4. Re:Huh? by Pseudonym · · Score: 1

      I guess that makes sense. The organisations that need the trust do the work, and the blockchain is kept private among those organisations.

      --
      sub f{($f)=@_;print"$f(q{$f});";}f(q{sub f{($f)=@_;print"$f(q{$f});";}f});
  8. this sounds like some journalist got hoaxed by cas2000 · · Score: 2

    blockchain and bitcoin hype is ridiculous, but this is just absurd.

    "Kangaroo bonds" (they bounce right back, right?) and "bond-i". yeah, right.

    And since when does the World Bank tell the Commonwealth Bank of Australia what to do?

    1. Re:this sounds like some journalist got hoaxed by Anonymous Coward · · Score: 1

      Mandate is an overloaded term, I don't think it means ordering here but more like giving a mandate as in elections.

      It's real by the way : http://www.worldbank.org/en/news/press-release/2018/08/09/world-bank-mandates-commonwealth-bank-of-australia-for-worlds-first-blockchain-bond

      I don't think they understand what distributed means though, they run their own Ethereum blockchain. So it's just a centralized alternative to existing centralized security settlement system, only advantage I see is there will be no collusion with short sellers. I'd rather just have DTCC&co stop cooperating with naked shorting but if the blockchain hype can help with it, so be it.

  9. What could possibly go wrong with that!? by Mr307 · · Score: 1

    A 'financial instrument' based on an unregulated gambling greater fool bubble.

    Its too bad we dont have any experience with 'financial instruments' and derivatives in any other unregulated area.

    1. Re:What could possibly go wrong with that!? by Mr0bvious · · Score: 1

      Just because 95% of crypto currencies are junk nonsense, doesn't mean that none have utility.

      I do understand that the vast majority of "popular" crypto currencies are in the nonsense and have no utility category. But there are some that have a real world use and will disrupt some existing industries.

      It's a bit like saying all tech companies were worthless junk during the .com boom, which would be nonsense. But there most certainly was quite a pile of junk still.

      --
      Never happened. True story.
  10. COCK BUTTER! by Anonymous Coward · · Score: 0

    My asshole has swollen shut! Won't someone think of the children?