Yesterday Colombia’s central bank, Banco de la Republica, announced a blockchain bond pilot where the bond was issued by Banco Davivienda and subscribed by the Inter-American Development Bank, IDB.
The blockchain solution will be integrated with the central bank’s high value payment network, and Banco de la Republica also has an observer node on the network.
Beyond bond issuance, the solution will trial the entire lifecycle of the debt, including secondary market trading and redemption.
Key benefits expected from the solution include:
- lower costs
- shorter processing times
- improved traceability
- enhanced security
- less information asymmetry
- reduced risk.
IDB isn’t just buying the bonds but also providing the core technology. The IDB Lab founded LACChain, a regional public permissioned blockchain network for Latin America and the Caribbean that is being used for the bonds. LACChain has run various trials, including tokenizing cross border payments with Citibank.
Meanwhile, bond issuance is a popular blockchain application, in large part because of the potential benefits outlined. There have already been numerous pilot bond issuances, including by the World Bank, the European Investment Bank, and Singapore’s DBS Bank.
