PROJECT BONDI. Blockchain Offered New Debt Instrument

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1 PROJECT BONDI Blockchain Offered New Debt Instrument

2 What is the World Bank? An international organization owned by 189 member countries its owners are its clients. Purpose is to end extreme poverty and promote shared prosperity in a sustainable manner. These twin goals are aligned with the Global Goals. The world s largest source of development finance and expertise 70 years of financing development projects. About US$185 billion in loans outstanding in about 80 countries. Nearly 12,000 staff in 136 offices including in the Washington, DC headquarters Largest shareholders are: US, Japan, China, Germany, UK and France. International Bank for Reconstruction and Development (IBRD/ World Bank ) is rated AAA/Aaa based on its capital, reserves and prudent financial policies. 2

3 IBRD Invests for Impact Globally JAMAICA ARMENIA Improving Urban Infrastructure & Services >50,000 people will have improved solid waste management services >10,000 people have electricity 1,200 families with water pipe access 4,500 provided with jobs training IBRD Financing: $42 million Improving Education Readiness and Quality 2400 preschool enrollees 120 community based preschools 107 high schools with improved education resources IBRD Financing: $15 million PANAMA Connecting rural mothersand children with quality health services 200,000 people have access to mobile health units Babies <1 year of age with complete vaccination records More births attended by skilled personnel IBRD Financing: $40 million BRAZIL Improving water quality and environmental sustainability Integrated environmental licensing and water rights management systems 20% efficiency improvements in water use IBRD Financing: $70.28 million GABON Boosting Women s Employment 12,750 women are expected to benefit from new jobs and skills by the project s end in 2019 IBRD Financing: $18 million CHINA Reducing greenhouse gas emissions in farming communities CO2eq. emissions reduced by 800,000-1,000,000 tons/year 400, ,000 rural households get cleaner biogasbased cooking and heating systems IBRD Financing: $120 million 3

4 Bonds for Sustainable Development World Bank purpose is a social one all bonds issued by the World Bank support sustainable development. Investors support various sectors: agriculture, education, energy, finance/trade/industry, governance, health and social services, transportation, water/sanitation and themes: gender, environment. Newsletters Investor- Newsletter.pdf 4

5 Financial Inclusion Central Bank Issued Digital Currency WBG Blockchains Initiatives Crossborder Payments Carbon Market Blockchain for Development Personal Identification Land Administration Healthcare Industry Supply Chain Management 5

6 PROJECT BONDI OUR OBJECTIVE Broaden our knowledge of Blockchain and Distributed Ledger Technology Gain hands-on access to frontier technology and advanced Fintech partners Consider how new Fintech-enabled market structures might benefit the Bank and our clients Explore the potential applications of blockchain for development 6

7 BLOCKCHAIN Blockchain is a shared immutable ledger that creates a trusted record and history of transactions. Information held on a blockchain exists on a shared and continually reconciled database. Process Automation Reduced Reconciliation Market Visibility Regulatory Oversight Blockchain technology is widely accepted as having the potential to offer new capabilities for capital markets, where participants can share information and transact through trusted data structures common to multiple participants. 7

8 MARKET STRUCTURE Deed Poll and Registry Services Agreement RBA enters Austraclear Ltd in the Register as Holder Austraclear Regulations and Participant accounts IBRD Register maintained by Reserve Bank of Australia Austraclear System operated by Austraclear Ltd Participants Note obligations owed to person registered as holder by the Registrar Austraclear Ltd is the legal owner of Notes Austraclear holds benefits of Notes registered in its name for Participants in Austraclear system Note obligations owed to person registered as holder by Registrar Holders in whose name the Platform registers Notes are the legal owners of notes IBRD Register - based on the Platform Registrar - CBA Participants Deed Poll and Registry Services Agreement Holders recorded in register maintained on Platform, governed by Platform Rules and Platform Procedures. Participants may either hold the interest in Notes for themselves, or on behalf of others (as custodian). 8

9 MARKET PARTICIPANTS 9

10 THE PLATFORM Permissioned consortium blockchain network Private version of Ethereum protocol Proof-of-Authority consensus algorithm (AuRa) Off-chain payments; no change to internal systems Code review conducted by Microsoft King & Wood Mallesons acted as legal counsel 10

11 Cybersecurity Consideration for Blockchain 1. Does the wallet have security vulnerabilities? 2. Are private keys properly secured? 3. Do you have a way to patch your blockchain platform? 4. What do you do if a vulnerability is found in the smart contract language / runtime you use? 5. Do you have a way to upgrade your smart contracts? 6. Should you run some components in a TEE module? 7. Is there enough validation of external interactions (off-chain Dapps, oracles, etc.) 8. Does the blockchain network have enough Byzantine tolerance? 9. Will your smart contract fail gracefully? 11

12 Potential Implications of Project Bondi Eliminate many of the current reconciliation processes Reduce the opacity of current market structures and improve market transparency Allow direct and secure holding of assets, bypassing custodians Digitally orchestrate the actions of multiple parties and reduce costs paid to intermediaries Reduce potential data corruption or loss: an immutable, append-only record may provide a higher quality of data than replication across many intermediaries Achieve fast atomic settlement, if issues of digital currency can be resolved or accepted 12

13 Project Bondi Future Additional market makers Enhanced secondary market functions Additional investors First coupon payment Possible regulators and other market participants to host nodes Third coupon payment Feb-19 Aug-19 Feb-20 Aug-20 Enhanced reporting functions & investor interface Second coupon payment Potential for on-chain payment? IBRD first blockchain bond maturity 13

14 Join the action Let s work together to adopt innovation and stay relevant to our clients. BlockchainLab@worldbankgroup.org Thank you! 14