The Tel Aviv Stock Exchange (TASE) announced on Wednesday that it is working together with the Israeli Ministry of Finance (MoF) to implement government bonds issued using blockchain technology.
The project, called 'Eden', will be conducted as a pilot, issuing the first digital government bonds using technology and support from cryptocurrency companies Fireblocks and VMware.
The Israeli Ministry of Finance and TASE have formed a joint team to perform a Proof of Concept (PoC) of the clearing of digital bonds. The latest solution is expected to use distributed ledger technology (DLT), tokenization and smart contracts.
"The financial markets are undergoing drastic transformations in recent years, with the introduction of revolutionary technologies that affect the manner in which customers worldwide operate and invest. As a global technology leader, we hope to see Israel spearhead financial technology as well, being the first to implement cutting-edge technologies and upgrade the capital market, making it more accessible to the public," Ittai Ben-Zeev, the CEO of TASE, commented in a press release.
"I would like to thank the Accountant General and all those partaking in this important project, which is the first and important step to creating a more advanced and accessible capital market," Ben-Zeev added.
Live Test With Local and International Banks
The Proof of Concept will include digitizing and issuing a new series of state bonds. Leading local and foreign banks are participating in the initial version of the system. For this purpose, they will be connected to a dedicated blockchain network developed by TASE and its partners.
The digital bonds will be assigned to the participants' e-wallets. The remuneration for the issuance will be paid in digital currencies and sent to the pilot participants by Stae of Israel.
"The move that we are currently leading, jointly with TASE, for the issuance of state bonds on a Blockchain platform places Israel at the forefront of technology and allows us to examine, in a secure and controlled manner, new possibilities for the issuance and management of the government debt. I believe that Blockchain-based technologies are here to stay, and over time will permeate the core of the financial markets, thoroughly and deeply altering them. It is our duty to constantly examine new technologies and methodologies." Yali Rothenberg, the Accountant General, said.
Project 'Eden' aims to simplify the government's complex debt issuance process and management using innovative blockchain technology. According to the Israeli Finance Ministry, the new approach will help reduce costs, shorten issuance times and mitigate risks.
Answer to Worldwide CBDC Trends
TASE admits that the motivation for launching the project was the efforts of other central banks and governments in the public use of DLT technology, tokenization and the tests conducted on Central Bank Digital Currency (CBDC) issuance.
This year, more countries are joining the CBDC trend. Iran, among others, wants to issue its crypto-rial. The Massachusetts Institute of Technology (MIT), meanwhile, partnered earlier this year with the Bank of England (BoE) and the Bank of Canada (BoC), also working on their solutions in this area.
