Commonwealth Bank of Australia issues government bond on blockchain
25 January 2017 | 10031 views | 0
Commonwealth Bank of Australia has issued a cryptobond for Queensland Treasury Corporation in the first trial run of the bank's private, permissioned blockchain platform for the end-to-end issuance of bonds.
The bank says 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.
Commonwealth Bank’s dedicated blockchain team developed the prototype in the bank's Innovation Lab, in conjunction with the Institutional Banking & Markets’ debt markets team and its clients.
George Confos, executive general manager of business & corporate finance at Commonwealth Bank, says: “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.
He says the distributed ledger 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, says Confos, consolidating the investors’ payment and the issuers’ title transfer into a single, instant transaction.
Grant Bush, deputy CEO and managing director, funding and markets at QTC says: “We are looking at the long-term implications of the technology as a semi-government issuer. The collaboration with CBA and other stakeholders involved is proving to be extremely useful as we can understand and think through applications along the way based on the prototype.”