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Why did the World Bank launch a blockchain-operated debt instrument?

22 Aug 2019 : 12:21
2 min read

In 2018, the World Bank and CommBank (The Commonwealth Bank of Australia) made an alliance to work together in an innovative financial product. The titans teamed up to create a register of the bond market using blockchain technology.

The Commbank confirmed the partnership and the launching in an official blog post by commenting:

 “Debt capital markets today comprise numerous interconnected intermediaries and agents undertaking intersecting roles for markets to function. Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight”. 

The blockchain-operated debt instrument is the first of its kind and promises to bring enormous benefits to the traditional banking industry. However, a community of economists and crypto-enthusiasts have started to spread the idea that the tool is simply another tool to sell massive debt. The Ethereum-based blockchain will be able to sell huge amounts of debt by using an interbank network, as well as many corporations.

The plan to sell debt via blockchain is getting bigger with time, as the latest announcement of the World Bank states that the international body is expected to be lending around $50 billion to $60 billion with the use of those “Bonds-i”. Some analysts in the financial community have been really critical regarding the tool by saying:

“It’s not too hard to notice the shell game taking place with the World Bank’s growing bond scheme and so-called ‘compassion’ toward poorer nations. Many people believe loan sharks of this capacity are not compassionate at all and are only selling the debt to the unfortunate in a parasitic way”

Image licensed via Pexels

Michela Silvestri

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