Israel Eyes Blockchain Bonds | PYMNTS.com
The Tel Aviv Stock Exchange (TASE) has recently signaled its interest in exploring innovative uses of distributed ledger technology (DLT) in financial markets.
In announcing its new strategy for the years 2023-27, TASE said it will work to strengthen its digital, data and analytics offering, which will include creating new digital assets and developing a range of solutions and services for institutional investors and liquidity providers through TASE Clearing House.
Related: Israel: At the Confluence of FinTech, Cybersecurity Innovation
The exchange expects that blockchain and DLT will play an important role in the new strategy and suggested that it could convert existing infrastructure and develop new platforms to enable the tokenization of various classes of assets.
TASE has previously moved to conduct a proof-of-concept pilot for the issuance of government bonds on a blockchain platform.
As announced last month, blockchain technology company Fireblocks and cloud infrastructure developer VMware have already been selected to participate in the pilot.
Read more: Blockchain, Crypto Firm Fireblocks Tops $100 Million in Annual Recurring Revenue
The rise of blockchain bonds
The prospect of issuing bonds as tokenized digital assets on a blockchain has gained traction in recent years. Governments, intergovernmental organizations and private financial institutions have all turned to DLT to streamline the issuance and exchange of debt securities.
A landmark example was pioneered by the World Bank, which began issuing debt in the form of “bond-i” bonds in 2018. Since then, the international financial institution has increased the platform’s capacity by enabling secondary bond trading registered on the bond-I blockchain.
At the national level, Thailand and the Philippines issued blockchain-based bonds in 2020, and in both cases for bonds aimed at private investors. Poland has also used the technology to track the issuance of some of its government bonds, while in the UK the prospectus was launched by then finance minister Nadhim Zahawi back in July.
Although TASE has not given any indication of the specific blockchain it will use for the pilot, in previous projects either the public Ethereum blockchain or a private version was the most widely used.
Notable exceptions include Bank of China’s proprietary blockchain and Société Générale, which issued a tranche of medium-term euro notes on Tezo’s public blockchain last year.
Learn more: BNP Paribas becomes the latest bank to embrace blockchain
Whichever route TASE chooses, its partner in the pilot, Fireblocks, supports 30 different blockchain protocols, including those commonly used to issue and track bonds.
Beyond the tokenized government bond pilot, Israel’s new strategy suggests an interest in expanding the concept to a wider range of assets in the future. TASE also plays an important role in a number of Israeli markets, including those for privately issued securities such as corporate bonds, shares and warrants.
As the world gets used to the idea of recording important transactions on distributed ledgers, Israel’s stock exchange is certainly gearing up to ride the wave all the way.
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