TASE piloting first digital sovereign bond with VMWare and Fireblocks

The Tel Aviv Stock Exchange (TASE) and Israel Finance Ministry are examining the application of the issuance of digital government bonds on blockchain. The two have recently established a joint team to perform a Proof of Concept (PoC) of the clearing of digital bonds of the State of Israel on a new platform for the trading and clearing of digital assets. The new platform is based on blockchain, aka Distributed Ledger Technology (DLT), smart contracts and tokenization.

The PoC is motivated by financial markets development such as the use of DLT, tokenizing of different types of assets and the various tests ran by financial institutions and central banks worldwide concerning the issuance of Central Bank Digital Currency (CBDC) and expected to effect advanced change in the financial markets, in general, and in the trading and clearing arenas, in particular.

Government debt raising and management processes, which are complex by nature, are generally of a large scale, require synchronization between several systems, incorporate multiple parties (local and international) and are subject to strict regulatory monitoring and guidance.

Called “Project Eden”, the results are expected to serve as the foundation for upgrades of other traditional mechanisms down the road. The implementation of the advanced technologies will reduce costs, shorten the duration of issuance and clearing of government bonds, improve transparency, streamline processes and mitigate risks.

The PoC will include the digitalization of a new series of bonds and its issuance to the system participants. As part of the issuance, international banks and local primary dealers will participate in a “live test”, during which they will be connected to a dedicated blockchain system that will be developed by TASE and tech vendors.

The acquired units of the new series will be issued into the e-wallets of the pilot participants. The issuance consideration, in digital currency, will be transferred from the e-wallets of the participants to a dedicated e-wallet by the State of Israel.

Ittai Ben-Zeev, CEO of TASE, said in a statement: “The financial markets are undergoing drastic transformations in recent years, with the introduction of revolutionary technologies that affect the manner in which customers worldwide operate and invest. As a global technology leader, we hope to see Israel spearhead financial technology as well, being the first to implement cutting-edge technologies and upgrade the capital market, making it more accessible to the public.”

Senior deputy accountant general and head of the Financing Division, Gil Cohen, said in a statement: “In the Ministry of Finance, we closely monitor the prominent technological developments that affect the capital markets worldwide, including blockchain. Six months ago, we conducted a hackathon to examine the applications of Blockchain in the issuance of government debt, which hosted Israel’s top startups in this field. We are now taking the next big step of examining the issuance of state bonds on blockchain, a step that has the potential to create a more advanced and accessible capital market that will streamline the management of the government debt.”

Michael Shaulov, CEO and co-founder of Fireblocks, said in a statement: “Digitizing the financial system takes the collaborative efforts of both the public and private sectors. Fireblocks is honored to work with the Israel Ministry of Finance, the Tel Aviv Stock Exchange, and VMware to develop the first digital state bond in Israel. With this PoC, Fireblocks was able to build a foundational technology layer for the issuance of digital bonds that is secure, highly-scalable, and may be deployed by TASE for any other innovative digital asset use cases in the future as they strive to increase capital markets accessibility for all.”


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