The Commonwealth Bank of Australia has announced what it describes as a world first: The use of Bitcoin-inspired blockchain technology to issue a bond.
The bond — dubbed a “virtual cryptobond” by CBA — was issued by the Queensland Treasury Corporation, the Queensland government’s central financing authority.
The transaction used CBA’s private blockchain platform. For the trial, QTC was both the issuer and the investor. CBA said that its blockchain platform was used to generate a bond tender, view investor bids in real time, finalise investment allocation and settle instantly.
The “working prototype” bond has the ability to automatically pay coupons to its holder when due, CBA said.
The bank said that the use of a decentralised digital ledger streamlines the issuance of bonds and simplifies settlement, using a single platform for both the bond register and payment platform.
“We are delighted QTC and our other government treasury partners are participating in the project,” CBA’s head of blockchain, Sophie Gilder, said in a statement.
“Building the capital markets platform and collaborating with forward thinking partners has accelerated our understanding of blockchain in the real world. Our long term view is blockchain technologies will significantly alter capital markets dynamics, changing the way participants interact, with increased efficiency having positive impacts on risk, cost and transparency.”
Last year the bank participated in what it said was another world first: A global transaction employing a “smart contract” that used a blockchain-inspired distributed ledger. The transaction involved US-based Brighann Cotton sending a shipment to Brighann Cotton Marketing Australia and leveraged Skuchain’s Brackets system. CBA and US bank Wells Fargo participated.
CBA is a member of the R3 consortium, which is researching how blockchain technology can be used by the banking sector. CBA’s chief information officer, David Whiteing, has said that he sees “huge potential” for blockchain technology in the industry. In a speech in mid-2016 the CIO said the bank had run dozens of experiments using blockchain.
Whiteing believes trade finance is one area where blockchain could make it significantly quicker to process contracts; others potentially include applications in the procurement and share trading and settlement spaces.
The CSIRO’s Data61 and the Treasury have collaborated on potential uses for blockchain.
Greg Medcraft, the head of Australia's corporate regulator, the Australian Securities and Investments Commission, believes that blockchain technology could dramatically change the global financial system.