Israel launches trials of its tokenized digital state bonds

Israel’s Ministry of Finance and the Tel Aviv Stock Exchange (TASE) are preparing to issue a blockchain-based digital state bond. In partnership with Fireblocks and VMWare, they are set to perform live testing of a new platform soon.

The Israeli government and TASE are partnering with digital asset infrastructure firms Fireblocks and VMWare to perform live testing of a new platform using smart contracts and tokenization for the trading and clearing of digital bonds.

As the local media reported on Oct. 19, the new project titled Eden is intended to reduce costs and optimize the procedure of national bond issuance.

“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,” the accountant general Yali Rothenberg said.

The live test will see units of the digital bond issued to e-wallets of the acquiring participants, paid for in digital currency which will be transferred to the Israeli government’s e-wallet.

Israel’s Ministry of Finance and the TASE aim to streamline processes, reduce costs and shorten the duration of issuance and clearing of state bonds.

“The current project kicks off the journey into this new world, allowing a first and important foothold that will serve as the foundation for the upgrading of other traditional mechanisms down the road,” they said Wednesday.

The government and TASE expect to finish the pilot project by Q1 2023.

The list of countries and international bodies that have digitalized their bonds is not long. The World Bank for Reconstruction and Development and the Commonwealth Bank of Australia became pioneers back in 2018, raising $110 million for two-year blockchain bonds. In 2021, the European Investment Bank followed the path by issuing 100 million euros in digital bonds.

While the most prominent national example is El Salvador, which ties its “Bitcoin bonds” to a larger crypto-centered strategy of development, Colombia and the Philippines have also dipped their toes in digitalizing the government bonds. In 2022, the UK voiced its intention to explore blockchain for government bonds as well.