25 January 2017
Commonwealth Bank of Australia (Commonwealth Bank) has issued a cryptobond for Queensland Treasury Corporation using its capital markets blockchain platform, in the first blockchain bond issuance by a government entity both in Australia and in the world.
The transaction marks the first trial of Commonwealth Bank’s private, permissioned blockchain platform for the end-to-end issuance of bonds.
Queensland Treasury Corporation (QTC) successfully used the blockchain to generate a bond tender, view investor bids in real time, finalise investment allocation and settle instantly with investors. QTC acted in both the issuer and investor role to test the end-to-end process for the issuance.
The QTC bond was created in digital form using smart contract technology, and has the ability to 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.
Commonwealth Bank’s dedicated blockchain team developed the blockchain prototype in the Innovation Lab, in conjunction with the Institutional Banking & Markets’ debt markets team and its clients.
The use of a decentralised digital ledger for a bond streamlines the issuance process, optimising the transparency of price and demand discovery during the bond’s bookbuilding process. The blockchain platform also simplifies the bond settlement process by acting as both the bond register and payment platform, consolidating the investors’ payment and the issuers’ title transfer into a single, instant transaction.
George Confos, Executive General Manager of Business & Corporate Finance at Commonwealth Bank, said: “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,” Mr Confos said.
Source: Commonwealth Bank of Australia
Illustration Photo: Commonwealth Bank of Australia (credits: Francisco Schmidt / Flickr CC BY-NC 2.0)