Blockchain bonds are issued debt that uses distributed ledger (DLT) (blockchain) to record and manage these debt securities. The World Bank has first provided a new debt certificate (initials: Bond-I) in 2018, and has been providing further provisions since then.
The following explains the reasons why the World Bank is experimenting with this technology and what progress it has made.
Key takes
What are the World Bank blockchain -based bonds?
Blockchain supporters want to change the conventional bond market by providing, trading, and managing digital bonds, which are sometimes referred to as blockchain or DLT bonds. 。
Digital bonds can take two major formats.
Native Digital Bond: These are issued directly to the distributed ledger or blockchain. They are completely in the digital area and are outside the conventional market structure. The latest initiative of the World Bank, including the 2023 Euro exemption issuance, is classified into this category.Tokenized traditional bonds: These starting as a conventional bond, but are digitally represented by a token on the blockchain while being held by traditional custodians. This approach fills the gap between conventional finance and digital finance.
Details of these three bond issuance will improve this:
Bond I Pioneer (2018)
The first global bond was completely managed through distributed ledger technology.Initially, it raised $ 110 million (about $ 80.2.5 million US dollars) arranged by the Federal Bank of the Bank of Bank.
EUROCLEAR DIGITAL SECURITIES (October 2023)
EUROCLEAR’s D-FMI’s first digital securities are worth 100 million euros (about $ 18 million), and Termuses for three years is connected to a conventional settlement platform for traditional market management of wash basin. We have distributed the ledger technology for creating, issuing, and solving the bonds.
6 digital exchanges (May 2024)
CHF 200 million (about $ 226 million), 7 years of digital bonds
Listing both digital and conventional replacements that deserve attention by using the digital currency of the central bank for reconciliation indicate the integration of digital bonds and institutional financial infrastructure.
Advantages of blockchain bonds
According to researchers in the World Bank, blockchain bond experiments, especially through bond I programs, are as follows.
The rational back office operation of the back office operation by monitoring and reporting the automated compliance is all a single transparent transaction recorded by all political parties to reduce the operation costs in the issuance and payment process. Control so that you can access the party
Possibility of financing infrastructure
Supporters argue that digital bonds have special promises to raise funds for infrastructure.
Expanded investor -based basis by enabling large -scale infrastructure investment in the number of portion of infrastructure investment and reducing the transparency of the minimum investment value at the cost of requesting project governance and construction billing projects. We will increase the ability to track and verify the milestone of the project.
In 2024, the World Bank issued $ 52 billion bonds and still issued about $ 262 billion bond debt. The provision of the blockchain was not the important part of the bond program.
In 2024, the World Bank issued $ 52 billion bonds and still issued about $ 262 billion bond debt. The provision of the blockchain was not the important part of the bond program.
Important tasks
However, the World Bank reports that it has suggested important shortcomings in a limited building out of bonds.
Legal and regulated hurdles
Necessary legal structures behind the bond conditions Requirements for various restrictions in the jurisdiction of various regulations questions
Technical and operation considerations
It is difficult to integrate with existing financial infrastructure for standardization through the off -chain process platform song requirements
Security problem
An important task for blockchain bonds lies in security architecture. The private blockchain network used for bond issuance is different from the public blockchain such as bitcoin and Ethereum, which derives security from large -scale distributed networks, usually smaller, centralized, and intensified. It will be more vulnerable.
Important security concerns include interfaces and storage mechanisms that allow investors to access and hold digital bonds, and can be a potential attack vector. In addition, many platforms do not disclose network protocols or security mechanisms, and question the ability to undertake potential threats.
Further world bank bond issuance hold -up
The issuance of blockchain bonds remains limited for multiple important issues.
Infrastructure Cost: The conventional bond market is a large -scale ($ 145 trillion) with established systems. Switching to new technology requires enormous investment.Regulatory maze: Various countries have different rules related to blockchain securities and can create issuing complexes across borders. Technology makes it difficult to achieve critical mass. Technical barrier: Many market participants lack the specialized knowledge and systems required to handle blockchain -based assets.
I’m looking forward to it
According to the World Bank, the use of blockchain in the bond market has been a good success. This technology can reduce friction and improve efficiency, but it is necessary to build it based on the legal and regulation framework that works well in these systems. This is especially true in emerging markets, which are said to have potential profits, but are said to be higher.
At present, the issue of additional blockchain bonds by the World Bank may have been performed through any of the following:
Gradually integrated with the conventional market on the pilot project regulation sandbox Experimentstarged bond issuance road surface
Why is the World Bank leading these experiments?
Through the blockchain innovation lab launched in 2017, the World Bank aimed at researching the impact of these technologies on the global economy and sharing insights with other countries and institutions. Furthermore, the decrease in the minimum investment and reconciliation can help to increase the access to international financial markets and promote global development and financial envelopes.
Why is blockchain bonds different from ordinary bonds?
The difference in core is not the bond itself. Both types are promised to pay interest and return the principal. An important difference is how to manage bonds. Traditional bonds rely on multiple intermediaries (banks, clearing houses, and custodians), takes up to three days to solve transactions, and usually needs a larger minimum investment. Blockchain bonds can use a single shared digital ledger to solve the transaction almost immediately, provide a small minimum investment, and automate many processes through smart contracts.
What is Central Bank’s digital currency (CBDC)?
CBDC is a digital format of the official funds of the country that the Central Bank is directly issued and supported. Unlike universified cryptocurrencies, CBDCs are intensified and represent the same value as physical cash. These digital currencies can take two major formats. Retail CBDC for public use in daily transactions, and wholesale CBDC explicitly designed for financial institutions used in large -scale financial operations.
Conclusion
From pioneering bonds I in 2018 to recent digital bonds related to Euro Clear and six digital replacements, the World Bank blockchain Initiative may apply blockchain technology in the bond market in the world. Both are shown.
These experiments show promising benefits such as faster reconciliation, improvement of transparency, and automation processes, but only a part of the $ 262 billion portfolio of the World Bank and the $ 145 trillion global bond market. It keeps a wide range. For now, a wide range of recruitment is facing large hurdles, such as infrastructure costs, complicated regulations, and technical barriers.
