The Austrian government announced on September 27, 2018, the auction of €1.15 billion ($1.35 billion) worth of government bonds on the Ethereum blockchain. The sale begins on October 2 with operations overseen by Oesterreichische Kontrollbank (OeKB), one of Austria’s biggest banks.
First Time Western Government Uses Public Blockchain for Bonds
A blockchain notarization service that OeKB’s IT department internally developed will be responsible for overseeing the actual auction, pulling information from the Austrian Direct Auction System, and hashing the values as public blockchain data on Ethereum.
Australia has issued bonds using blockchain technology in the past, but those bonds were released through a private system hosted on Ethereum’s platform. Austria, on the other hand, will be posting all the details publicly. Another Japanese company also issued their form of bonds in 2017 but focused on profiting from bitcoin, rather than a national government looking to issue debt within their currency.
Austria’s decision to hash their values onto the public chain enables anyone to explore and verify the results of the auction and offers a level of transparency unachievable with traditional means.
While most countries see blockchain as either a disruptive technology or a risky venture, Austria sees it as a transformative economic policy. Austria’s Finance Minister Hartwig Löger explained:
“For us, blockchain technology forms a focus of economic policy. Through setting up the FinTech Advisory Council at the Ministry of Finance, we are developing strategies enabling Austria to benefit optimally from these developments.”
While the government will not be tokenizing bonds and issuing them on the Ethereum platform in the form of ERC-20 tokens, this is still a monumental step that governments across the world can take notes from for the success or failure of their bond issuances.
The digitization of assets and financial securities on the blockchain has been an oft-cited use case scenario discussed in the past, but it’s good to see banks finally coming forth and making the theoretical a reality.