How Bond-i is Looking to Raise Money

Do you own any cryptocurrencies?

No need to send in your answer, it is only a rhetorical question.

The reason I ask is that I recently saw the results from a survey by crypto app Gem alongside Harris Insights, an analytics firm.

According to the survey, while 52% of Americans own stocks, only 8% of Americans invest in cryptocurrencies. And, about 41% say that they have no interest in investing in them…ever.

My point is, you may be hearing a lot about cryptos on the main media, but not many people actually own them. It is still a very small market.

Cryptos were quite popular last year as bitcoin, the first crypto, went on to boom to almost US$20,000. Since then the price has dropped, currently trading at around US$6,200.

Cryptos Are Highly Volatile

The thing with cryptos is that they are highly volatile.

Take bitcoin for example. In the last three months bitcoin has fluctuated between US$5,800 and US$8,600. That’s quite a range.

But, that’s their nature. The crypto market trades 24 hours a day 365 days of the year, and they can skyrocket as soon as they plummet.

You mainly only hear about cryptos when the prices hit a new high…or a new low. Things like ‘cryptos are sinking’ or ‘the crypto market has lost 20% of its value’.

But, as we have written before, if you are focusing only on crypto prices you are looking at it all wrong.

There is a lot going on behind the scenes, and a lot of infrastructure getting build with blockchain. Bitcoin is the first application of the blockchain and blockchain is the technology that powers bitcoin.

If you haven’t heard of blockchain, it’s a shared online ledger, a database that every member in the network can see and contribute to.

Battle of the Titans: Who wins when bitcoin and gold head-to-head…and how can you profit? Find out more.

A lot of institutions are starting to look at cryptocurrencies and blockchain, and how to deal with this new asset class.

And, slowly, blockchain is starting to filter into our financial life. There is a lot of investment going into blockchain projects.

The latest one to get in is The World Bank, one of the largest international lenders in the world. According to the bank, they issue between US$50–US$60 billion in bonds for sustainable development each year.

They are looking at blockchain to help them raise money. That is, they have partnered with the Commonwealth Bank of Australia (CBA) to create the world’s first blockchain bond.

As they put it in their joint press release, they are creating the first bond ‘globally to be created, allocated, transferred and managed through its life cycle using distributed ledger technology.

The name of the new bond? Blockchain Offered New Debt Instrument…or bond-i, for short. Yep, exactly like Sydney’s famous beach.

And, as the press release continued, they are already seeing ‘strong’ interest in the new bond-i from investors. 

Why Has The World Bank Chosen Blockchain Technology?

Well, as the joint press release continued:

Blockchain has the potential to streamline processes among numerous debt capital market intermediaries and agents. This can help simplify raising capital and trading securities; improve operational efficiencies; and enhance regulatory oversight.

Arunma Oteh, World Bank Treasurer, said: “Since our first bond transaction in 1947, innovation and investor satisfaction have been important hallmarks of our success with leveraging capital markets for development. Today, we believe that emerging technologies, equally offer transformative, yet prudent possibilities for us to continue to innovate, respond to investor needs and strengthen markets. […]”

‘”Our sincere appreciation to our pioneer blockchain bond investors, who are partnering with us on this transaction because of our common desire to champion greater efficiency, and transparency as well as more robust issuance processes.”’

The thing is that issuing bonds can be quite labour and paper intensive. There are a lot of steps, intermediaries and agents.

Taking this process onto the blockchain could cut expenses, simplify processes and make things more efficient.

That’s what blockchain is all about.

It allows the verification process to be spread among the many, adding a mechanism of trust to the internet. That way we can cut intermediaries and reduce costs. At the same time, it can reduce paperwork and make things more efficient.

And, blockchain could disrupt any industry with those characteristics, not just in finance.

Think of shipping…real estate…healthcare…energy…you name it.

There is a lot of infrastructure getting built in this space. Things are in the early stages, but blockchain could very well transform the way we do things.

So, next time you hear cryptos are dead, or they have taken a plunge, take a look at what else is going on in this space.

Best,

Selva Freigedo,
Editor, Markets & Money


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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