Israel's Ministry of Finance Accountant General and the Tel Aviv Stock Exchange (TASE) are examining issuing digital government bonds on a blockchain infrastructure. They have established a joint team to perform a Proof of Concept (PoC) of the clearing of State of Israel digital bonds on a new platform for the trading and clearing of digital assets. The new platform is based on blockchain, the technology behind cryptocurrencies, smart contracts and tokenization.
TASE and the Accountant General’s investigation are motivated by recent developments in financial markets, including use of DLT, tokenizing of different assets and tests run by financial institutions and central banks worldwide on issuing Central Bank Digital Currency (CBDC). The Ministry of Finance realizes that these developments will bring substantial changes to financial markets, especially in trading and clearing.
Government debt raising and management processes are complex, and large scale, and require synchronization between several systems, incorporate multiple parties (local and international) and are subject to strict regulatory monitoring and guidance.
The new project will create an important foothold that will serve as the foundation for the upgrading of other mechanisms in the future. The implementation of advanced technologies will reduce costs, shorten the time to issue and clear government bonds, improve transparency, streamline processes and mitigate risks.
The PoC will include the digitalization of a new series of bonds and its issuance to the system participants. As part of the issuance, the leading banks, both international and local (primary dealers), will participate in a "live test", during which they will be connected to a dedicated Blockchain system that will be developed by TASE and the select technology vendors. The acquired units of the new series will be issued into the e-wallets of the pilot participants. The issuance consideration, in digital currency, will be transferred from the e-wallets of the participants to a dedicated e-wallet by the State of Israel.
TASE CEO Ittai Ben-Zeev said, "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. 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."
Accountant General, Yali Rothenberg added, "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 overtime will permeate the core of the financial markets, thoroughly and deeply altering them. It is our duty to constantly examine new technologies and methodologies. Just recently, we have launched a new platform for State payments to small businesses. I would like to thank TASE and the other partners - the primary dealers and the technology companies - for their cooperation in this innovative and important project."
Published by Globes, Israel business news - en.globes.co.il - on October 20, 2022.
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