Israel utilizes blockchain for digital bonds issuance

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The Israeli Ministry of Finance and the Tel Aviv Stock Exchange (TASE) have announced a collaborative study to explore the feasibility of issuing government bonds via distributed ledger technology (DLT).

Yali Rothenberg, the country’s attorney general, disclosed that the move to explore the use of DLT is to open the nations to “new possibilities for the issuance and management of government debt.” At the moment, TASE and the Finance Ministry have set up a joint team to test a proof-of-concept for the new undertaking.

Titled Project Eden, the endeavor will see Israeli DLT infrastructure company Fireblocks play a critical support role in the study. Per the announcement, multi-cloud service provider VMware will also take part in the study after having an earlier stint in the Bank of Israel’s digital shekel pilot at the start of the year.

TASE and the Ministry of Finance are enthusiastic that issuing bonds on DLT is the right step for the country’s financial sector following the recent technological developments in Web 3. Both institutions noted that the move has the potential to foster “material and advanced change” in securities markets.

“In the Ministry of Finance we closely monitor the prominent technological developments that affect the capital markets worldwide, including blockchain,” said Gil Cohen, Senior Deputy Accountant General and Head of the Financing Division.

“We are now taking the next big step of examining the issuance of state bonds on blockchain, a step that has the potential to create a more advanced and accessible capital market that will streamline the management of the government debt,” he added.

The process of government debt raising and management is typically tedious, characterized by layers of local and international parties while stiff regulatory control further complicates the entire process. Some experts think that the use of DLT could reduce costs and improve the transparency and efficiency of the process.

DLT and Israel are a match made in heaven

In the Middle East, Israel has emerged as one of the strongest adopters of DLT technology, incorporating the technology into its governmental processes. The single largest deployment of DLT is in developing a central bank digital currency (CBDC), which the Bank of Israel is currently testing.

So far, two major tests have been carried out, with both hinging primarily on DLT. The first relied on the use of smart contracts, while the second focused on how to protect the identities of users using DLT.

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