According to a report, the Israeli government, in collaboration with TASE, has started testing tokenized digital bonds on the DLT platform to aid the country’s financial ecosystem.
This year has turned out to be the most eventful for the crypto space, where lay-offs, hacks, and exploits have become commonplace. Amid the crypto market crash, several government authorities have come up with different operations in the crypto industry. The primary motive behind the government’s interest in crypto is the use cases or implementation of blockchain technology to accelerate the country’s financial ecosystem by providing a product line based on it. Recently, the government of Israel and the Tel Aviv Stock Exchange (TASE) kicked off its blockchain-based digital bond testing to evolve its financial market processes and lower any associated costs.
Israel Eyes For Implementing Blockchain To Improve Financial Infrastructure
According to a report, the Office of the Accountant General in the Israel Ministry of Finance, in collaboration with the Tel Aviv Stock Exchange (TASE), the country’s only public equities bourse, have kicked off live testing of digital government bonds. Digital assets custody provider Fireblock and the United States software solutions developer VMware will jointly conduct the live testing on a distributed ledger technology-DLT. Israel seeks to start issuing these bonds after being tested. Israel has made an excellent venture as the proof-of-concept will involve the digitalization of a “new series” of government debt to be issued to select local and foreign primary dealers.
The project ‘Eden’ aims to help Israel in several ways. According to TASE and the Israel Ministry of Finance, the testing of digital bonds on the DLT platform will implement smart contracts, and tokenization for trading and clearing of digital assets is anticipated to reduce bonds’ associated costs, reduce the time interval involved in issuing and clearing bonds, provide more transparency, streamline the processes, and reduce risks of users. The live test will display the units of the tokenized digital bond issued to e-wallets of selected participants, paid for in crypto coins which will be further transferred to the Israeli government’s e-wallet.
Accountant General, Yali Rothenberg, stated, “I believe that blockchain-based technologies are here to stay, and over time will permeate the core of the financial markets, thoroughly and deeply altering them. It is our duty to constantly examine new technologies and methodologies.”
Digital Bonds Mark A New High In The Crypto Space
According to the Israel Ministry of Finance, the pilot project will kick off in the next few days and is anticipated to get completed by the end of the first quarter of 2023. TASE’s head of clearing, Orly Grinfeld, said, “Israel is almost the only market in the world where government bonds are traded on the main exchange, so it’s an opportunity to generate a pilot, with the involvement of the State of Israel and leading international banks.”
However, these digital bonds are centralized and under controlled by the Israel government for now, unlike some tokenized bonds like Société Générale’s partnership with MakerDAO in October 2021, which used the Ethereum public blockchain to become decentralized. An official from Fireblocks said that the authorized blockchain supports the Ethereum Virtual Machine; therefore, “If the Ministry of Finance wanted to issue digital assets on a public chain in the future, there would be little difference.”
TASE CEO Ittai Ben-Zeev, said, “The financial markets are undergoing drastic transformations in recent years. We hope to see Israel spearhead financial technology while being the first to implement cutting-edge technologies and upgrade the capital market.”
Verdict
The wide adoption of the blockchain industry has forced government authorities to come up with plans and build meaningful applications out of it to ease their efforts in the financial landscape. Several countries have already started testing DLT-based digital bonds, including the Philippines, which raised $186 million after investors started showing interest in it. Israel is also aiming to begin its CBDC test on financial institutions, leading the country to more closure to the crypto space.
