Published on 24 August 2018

SUSTAINABLE FINANCE

The World Bank turns to blockchain to improve efficiency and transparency

Blockchain is seen as an effective tool for financing projects in developing countries, according to the World Bank, which successfully tested its first blockchain-based bond. The multilateral bank has raised twice as she thought initially: about 80 millions USD.  

The World Bank launches its first blockchain-based bond.
@WorldBankGroup

The World Bank, a specialised United Nations agency, is tasked with granting loans to finance projects in developing countries. Its main sources of financing are bonds, valued at $50 to $60 billion each year. The financial institution is now looking to improve the efficiency and transparency of such a considerable money flow.

For that to happen, the World Bank has turned to blockchain technology.  This decision came about to support the development of cryptocurrency, especially bitcoin, as it helps streamline financial exchanges and keep track of all transactions, without fear of fraud. For example, the World Bank tasked the Commonwealth Bank of Australia, Australia's largest bank, with creating a blockchain-based e-bond. It will be built on Microsoft's cloud technology.

According to a representative of the institution, contacted by the AFP, the World Bank initially hopes to raise $50 million AUD (about $36 million USD). Finally, the multilateral bank annouced that she have raised twice: about $ 80 million USD. 

Earning money...and trust

In a statement, the World Bank writes, “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.

In a nutshell: they will do more, at the same cost. Blockchain allows for savings in "management fees" by removing certain intermediaries. Moreover, the process involving the traceability of sums involved from one end of the chain to another, the collection of funds, down to the project completion, will convince more investors.

"This pioneering bond is a milestone in our efforts to learn how we can advise our client countries on the opportunities and risk that disruptive technologies offer as we strive to achieve the (United Nations) Sustainable Development Goals,” said Denis Robitaille, spokesman for the World Bank.

Ludovic Dupin @LudovicDupin


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