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Israeli Government Completes Tokenized Bond Pilot on Blockchain
The Israeli government has announced the successful completion of a tokenized bond pilot, known as Project Eden, using blockchain technology.
The country said the introduction of the pilot program to explore the use of blockchain for tokenizing government bonds stemmed from the recognition that managing and raising government debt are crucial processes for governments worldwide.
Israel Inches Closer to Introducing First Digital Bond
Recognizing the pivotal role of managing government debt, Israel embarked on Project Eden by issuing digital bonds to enhance its debt market.
In a recent report by the country’s Ministry of Finance, blockchain technology was recognized for its transformative potential in bond issuance, offering benefits such as increased accessibility, transparency, and enhanced security.
The Israeli government unveiled its plan to explore the blockchain to issue bonds in 2022. Last year, the country introduced Project Eden, a proof-of-concept (PoS) system designed to facilitate the settlement of security tokens against various digital currencies.
Through the project, the nation launched a dummy government-issued bond in collaboration with the Israeli Finance Ministry of Accountants’ office and the Tel Aviv Stock Exchange (TASE).
The country has now announced the successful completion of the first in a series of pilots, paving the way for Israel to become the first nation to issue government digital bonds on a global scale.
During the pilot, the bonds were issued on VMware, a blockchain platform for multi-party workflows compatible with the Ethereum Virtual Machine (EVM).
The government also tapped FireBlocks, another blockchain company focused on building infrastructure solutions to facilitate the adoption of crypto by governments and other corporate institutions.
Technology at Its Forefront
In the report, the Israeli Finance Ministry explained that during the just-concluded pilot, the country tokenized digital bonds into security tokens compatible with ERC1155 smart contracts. This move allowed for seamless atomic transfers upon payment receipt.
According to the report, participants had to acquire the bonds using a custom payment stablecoin pegged to the Israeli shekel. The TASE Bond Management Contract was at the ecosystem’s core, facilitating bond-related processes like submission, approval, issuance, and settlement. It also enabled the transfer of tokenized bonds and payment tokens among counterparties.
Israel said the use of blockchain technology ensured the transparent recording of all transactions, allowing the pilot to offer real-time visibility to market participants. The decentralized application for issuing tokenized bonds also simplified onboarding, enhancing accessibility.
Showcasing Success
The country conducted a go-live event at the Tel Aviv Stock Exchange on May 31, 2023. The event saw 12 banks, both national and international, in attendance.
The Eden Go-Live event showcased the successful implementation of blockchain technology to significantly improve existing financial processes by reducing risk, enhancing efficiency, and improving immutability.
During the event, the Finance Ministry announced plans to expand the project to include other financial instruments and markets in subsequent pilots. Future iterations will explore tokenizing diverse asset classes, extending to public networks, and achieving interoperability.
Meanwhile, Israel recently unveiled plans to explore central bank digital currencies (CBDCs). The Jewish nation said it intends to launch interest-bearing CDBC, a digital version of its local fiat, Shekel.
Israeli Government Completes Tokenized Bond Pilot on Blockchain
