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Israel poised to release world’s first digital government bond

The initiative “marks a significant milestone in revolutionizing the settlement and issuance processes in traditional capital markets,” said the Tel Aviv Stock Exchange.

The Tel Aviv Stock Exchange, Nov. 29, 2020. Photo by Miriam Alster/Flash90.
The Tel Aviv Stock Exchange, Nov. 29, 2020. Photo by Miriam Alster/Flash90.

The Tel Aviv Stock Exchange (TASE) and Israel’s Finance Ministry have successfully completed the proof of concept phase for a digital Israel Bond traded on a dedicated blockchain platform, the TASE announced on Tuesday. The development positions Israel to release the world’s first digital government bond.

The collaboration between the TASE and the Finance Ministry’s Office of the Accountant General “marks a significant milestone in revolutionizing the settlement and issuance processes in traditional capital markets,” the TASE said.

A go-live event at the TASE on May 31 brought together prominent international banks, including Barclays, Deutsche Bank, First International Bank, Goldman Sachs, JP Morgan and Merrill Lynch, among others, as well as Israel’s banks.

In addition to the Finance Ministry issuing the first dummy digital government bond, the initiative, known as “Project Eden,” also introduced a digital payment token as a fundamental component of the settlement process.

During the live-day event, the primary dealers securely transferred dummy funds through their digital accounts. The Eden system was constructed in this configuration to facilitate the settlement of security tokens against various digital currencies, potentially including central bank digital currencies (CBDCs).

This aligns with ongoing projects led by central banks worldwide, as they explore the integration of CBDCs into traditional financial systems.

TASE CEO Ittai Ben-Zeev said, “Project Eden is very important for the Tel Aviv Stock Exchange. We believe that the Startup Nation can play a leadership role in the digital transformation of the capital markets. Within TASE we have tremendous technology talent and market structure leadership. We believe that the capital market information will be completely different in a few years, and it is our job to lead the revolution.”

Gil Cohen of the Finance Ministry said, “While everyday use of this technology to finance government debt is still in the future, we believe that this demonstration promotes the technological and regulatory discourse by all relevant parties to continue progressing towards a shared goal of improving the accessibility of financial markets for all.”

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