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(Kitco News) - The Tel Aviv Stock Exchange (TASE) and the Office of the Accountant General at the Israeli Ministry of Finance (MOF) have announced the successful completion of the Proof-of-Concept (PoC) phase for Project Eden, a blockchain-based digital bond system created as part of the Israeli government's efforts to modernize the country’s financial markets.
The project, first announced in October, was designed to showcase the potential for innovative technologies like blockchain, smart contracts and tokenization to reduce risk and improve efficiency and transparency in the financial markets.
“Project Eden is very important for the Tel Aviv Stock Exchange,” said Ittai Ben Zeev, CEO of TASE. “Within TASE we have tremendous technology talent and market structure leadership. We believe that the capital market information will be completely different in a few years, and it is our job to lead the revolution.”
“This joint endeavor marks a significant milestone in revolutionizing the settlement and issuance processes in traditional capital markets,” the announcement said. “The collaborative team has dedicated substantial effort and expertise to examine the application of blockchain infrastructure in the issuance and settlement of digital government bonds.”
As part of the trial, TASE held a go-live event on May 31 that brought together prominent international and local banks, including Bank Discount, Bank HaPoalim, Bank Leumi, Bank Mizrahi, Barclays, BNP Paribas, Deutsche Bank, First International Bank, Goldman Sachs, JP Morgan and Merrill Lynch.
During the go-live event, the MOF 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) that was specifically developed for this PoC.
A digital ‘Payment Token’ representing one Israeli Shekel was also introduced as part of the Eden ecosystem. The payment token served as a fundamental component of the settlement process.
“During the Live day event, the primary dealers securely transferred dummy funds through their digital accounts,” the press release said. “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.”
‘Atomic Settlement’ was used to complete the settlement process between the security tokens and payment tokens, “transforming the traditional securities settlement process through the dedicated TASE Bond Management smart contract.”
The TASE Bond Management smart contract served as an intermediary between the issuer and the investors, which helped ensure the verification of valid and approved tokens, prevent inconsistencies or incomplete transfers, and guarantee the accurate transfer of tokens.
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“The go-live event demonstrated the successful implementation of advanced technologies, showcasing their ability to transform financial markets including the issuance, settlement and clearing of financial assets such as government bonds,” TASE said. “By leveraging DLT [distributed ledger technology] and tokenization, financial institutions can enhance efficiency, reduce operational risks, and create new opportunities for investors, thereby transforming traditional financial markets.”
"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,” said Michael Shaulov, Co-founder and CEO of Fireblocks.
“There is no doubt that the world is undergoing significant changes, which are also impacting traditional systems,” said Orly Grinfeld, Executive Vice President and head of clearing at TASE. “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.”
