The Tel Aviv Stock Exchange (TASE) and the office of the Accountant General at the Israeli Ministry of Finance announced the completion of the Proof of Concept (PoC) phase for Project Eden, which tapped distributed ledger technologies (DLT), smart contracts, and tokenization in reducing risk and improving efficiency and transparency in the financial markets.
The go-live event at TASE together prominent banks, both international and local (Bank Discount, Bank HaPoalim, Bank Leumi, Bank Mizrahi, Barclays, BNP Paribas, Deutsche Bank, First International Bank, Goldman Sachs, J.P. Morgan and Merrill Lynch).
During the go-live event, the Ministry of Finance issued and minted the first dummy digital governmental bond on a blockchain-based platform as an ERC-1155 Security Token using a dedicated decentralized app (dApp) developed leveraging web3 solutions specifically for this PoC. The blockchain used for this PoC was EVM-compatible, enabling potential integration with other blockchain solutions in the future.
Project Eden also introduced a digital Payment Token as a fundamental component of the settlement process. Utilizing smart contracts and the ERC-20 token standard, the Payment Token represented one Israeli Shekel within the Eden ecosystem. During the Live day event, the primary dealers securely transferred dummy funds through their digital accounts. The Eden system was constructed in this configuration to facilitate the settlement of security tokens against various digital currencies, potentially including central bank digital currencies (CBDCs). This aligns with ongoing projects led by central banks worldwide, as they explore the integration of CBDCs into traditional financial systems.
The settlement process was done through atomic settlement between the security and payment tokens, transforming the traditional securities settlement process through the dedicated TASE Bond Management smart contract. The TASE Bond Management smart contract acted as an intermediary between the issuer and the investors, ensuring the verification of valid and approved tokens, preventing inconsistencies or incomplete transfers, and guaranteeing the accurate transfer of tokens.
Orly Grinfeld, executive vice president and head of Clearing at TASE, said in a statement: “There is no doubt that the world is undergoing significant changes, which are also impacting traditional systems. By leveraging blockchain technology, smart contracts, and tokenization, we have the potential to enhance traditional capital markets, making them more efficient, faster, and less risky. This has the power to revolutionize the way we conduct business. By harnessing this technology, traditional exchanges can create new business models, ultimately improving the services we provide to our valued investors and clients.”
“Fireblocks is incredibly proud of our collaboration with TASE, the Ministry of Finance, VMWare, and Blockfold,” said Michael Shaulov, co-founder and CEO of Fireblocks, in a statement. “The success of the Live Day event brought what we all imagined into reality – the interaction across wallets and token standards allowing for the near-frictionless issuance and trading of treasury bonds. We applaud TASE’s forward-looking vision and eagerly anticipate for what’s to come.”
In a separate announcement, the Bank of Israel (BoI) laid out principles for creating “acceptance” and “network effect” for a digital shekel as part of building a work plan so that it can be prepared to issue central bank digital currency (CBDC) should it decided to do so. Among the variety of aspects being examined in this project, the issue of acceptance of a new means of payment — how to ensure that a new shekel is adopted by the various user groups — is being given careful consideration.
From the paper: “A digital shekel will support very-high-value and very-low-value transactions. Some future use cases, such as DeFi, may include transactions of very high values. In contrast, others, such as micropayments for IoT, will feature transactions of very low values. In order for a digital shekel to answer all needs and be universal, it is important that the design take both these requirements into consideration.”