Global central banks are increasingly looking at blockchain technology as a tool to make interbanking processes more efficient and transparent.
Following the World Bank’s exemplary experience of blockchain bond transactions, South Korea’s central bank is working on its own blockchain-based bonds.
According to a report by local publication Yonhap Infomax, the Bank of Korea has been seeking a blockchain services provider in order to build a blockchain bond system that would allow distribution of the bond records among all participants.
The Bank of Korea reportedly launched a Proof of Concept (PoC) project in late 2019 in order to move bond transaction records that are currently maintained by the Korea Securities Depository to a blockchain-powered base of records accessible by multiple nodes.
The blockchain bond project would involve separate nodes operated by South Korea’s regulatory authority, the Korea Fair Trade Commission, the Bank of Korea and other financial institutions, the report notes.
A local official reportedly confirmed that the South Korea’s financial authorities have been testing the potential of blockchain in terms of issuing state bonds to record transactions:
“We are using government bonds to record securities and cash transactions in a distributed ledger and test whether a real-time simultaneous payment trading system is possible.”
According to Yonhap Infomax, the Bank of Korea’s blockchain research regarding the bond market is being conducted with reference to the purported first-ever blockchain bond transaction handled by the World Bank and the Commonwealth Bank of Australia back in 2018.
The World Bank raised a total of $74 million for its two-year blockchain bond as of August 2019. According to the bank, the bond is the first to be created, allocated, transferred and managed throughout its life cycle using distributed ledger technology.
Regarding the Bank of Korea, South Korea’s central bank announced in late 2019 that it will be setting up a dedicated group to research central bank digital currency in 2020.