The Commonwealth Bank of Australia (CBA) announced that it has issued Queensland Treasury Corporation (OTC), a crypto bond with the help of its capital markets blockchain platform. The trial marks the first government bond using blockchain in Australia and across the globe.

QTC used the blockchain successfully in order to create a bond tender, view investor bids in real-time, settle investment allocation, among others. The QTC played both the issuer and investor role to test the end-to-end process for issuance, the release stated.

Using smart contract technology, the QTC bond was created in the digital form. It has the capacity to automatically and quickly pay coupons to the current holder when it is due. Being a working prototype, the bond is non-tradable and does not carry any debt obligation.

“QTC is collaborating with CBA to experience the technology first hand through a working bond prototype. For QTC, we are looking at the long-term implications of the technology as a semi-government issuer. The collaboration with CBA and other stakeholders involved is proving to be extremely useful as we can understand and think through applications along the way based on the prototype,” Grant Bush, Deputy CEO and Managing Director of Funding and Markets at QTC, stated.

The use of blockchain for bonds indicates optimizing transparency of price and demand during the bond’s book-building process. Blockchain platform also simplifies the bond settlement process by being a bond register as well as a payment platform. The technology consolidates the investors’ payment and the issuers’ title transfer into a single, instant transaction.

The dedicated blockchain team behind CBA has developed the prototype using the distributed ledger in the Innovation Lab, along with the Institutional Banking & Markets’ debt markets team and its clients.

“We are delighted QTC and our other government treasury partners are participating in the project. Building the capital markets platform and collaborating with forward-thinking partners has accelerated our understanding of blockchain in the real world. Our long term view is blockchain technologies will significantly alter capital markets dynamics, changing the way participants interact, with increased efficiency having positive impacts on risk, cost, and transparency,” Sophie Gilder, Head of Blockchain at CBA, said.

Last year, CBA in collaboration with Wells Fargo and Brighann Cotton announced the first global trade transaction using blockchain technology that involved shipment of cotton from Texas, U.S. to Qingdao, China, by using the distributed ledger Skuchain’s Brackets system.