PROJECT BONDI Blockchain Offered New Debt Instrument
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
IBRD Invests for Impact Globally ARMENIA JAMAICA Improving Urban Infrastructure & Improving Education Readiness and Services Quality • >50,000 people will have improved • 2400 preschoolenrollees • 120 communitybased preschools solid waste managementservices • >10,000 people haveelectricity • 107 high schoolswith improved • 1,200 families with waterpipe access education resources • 4,500 provided with jobs training IBRD Financing: $15 million IBRD Financing: $42 million CHINA PANAMA Reducing greenhousegas BRAZIL GABON Connecting rural mothersand emissions in farming communities Boosting Women’s Improving water quality and • CO2eq. emissions reduced by children with quality health environmental sustainability Employment services 800,000-1,000,000 tons/year • Integrated environmental • 12,750 women are • 200,000 people have access to • 400,000-500,000 rural licensing and waterrights expected to benefit from mobile healthunits households get cleaner biogas- managementsystems new jobs and skills bythe • Babies <1 year of age with based cookingand heating • 20% efficiency project’s end in 2019 complete vaccinationrecords systems improvements in • More births attended by IBRD Financing: IBRD Financing: water use skilledpersonnel $18 million $120 million IBRD Financing: IBRD Financing: $70.28 million $40 million 3
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 http://treasury.worldbank.org/cmd/pdf/World-Bank- Investor- Newsletter.pdf 4
Central Bank Financial Issued Digital Inclusion Currency Cross- Personal border Identificat- Payments ion WBG Blockchain Blockchains for Development Initiatives Land Carbon Administr- Market ation Supply Healthcare Chain Industry Managem- ent 5
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
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 Reduced Market Regulatory Automation Reconciliation Visibility 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
MARKET STRUCTURE IBRD IBRD Note obligations owed Deed Poll and Registry to person registered as Services Agreement holder by the Registrar Note obligations owed to Deed Poll and Registry person registered as Register Services Agreement holder by Registrar maintained by Reserve Bank of Australia Register - based RBA enters Austraclear Ltd Austraclear Ltd is the legal on the Platform owner of Notes in the Register as Holder Registrar - CBA Austraclear System operated Holders in whose name Holders recorded in register by Austraclear Ltd the Platform registers maintained on Platform, Notes are the legal governed by Platform Rules Austraclear holds benefits of Austraclear Regulations owners of notes and Platform Procedures. Notes registered in its name for and Participant accounts Participants in Austraclear system Participants Participants Participants may either hold the interest in Notes for themselves, or on behalf of others (as custodian). 8
MARKET PARTICIPANTS 9
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
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
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
Project Bondi – Future • Additional market makers • Possible regulators and other • Enhanced secondary market functions market participants to host nodes • Third coupon payment • Additional investors • First coupon payment Feb-19 Aug-19 Feb-20 Aug-20 • Enhanced reporting functions • Potential for “on - chain” payment…? & investor interface • Second coupon payment • IBRD first blockchain bond maturity 13
Join the action Let’s work together to adopt innovation and stay relevant to our clients. BlockchainLab@worldbankgroup.org Than ank k you ou! 14
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