Austria Will Use Ethereum (ETH) to Track up to $1.3B in Government Bonds
There’s another major economy looking to raise funds with blockchain tech. Austria is auctioning $1.3 billion (€1.15B) worth of government bonds to be authenticated with the Ethereum blockchain.
The Oesterreichische Kontrollbank (OeKB) is auctioning a new set of government bonds next Tuesday. The OeKB is working with Austria’s Federal Government Finance Agency (OeBFA) to use the Ethereum blockchain to help manage up to $1.3 billion (€1.15B) worth of public debt, reports Kleine Zeitung.
Finance Minister Hartwig Löger (ÖVP) touted blockchain technology as “an economic policy focus” for Austria. In fact, its government is so enamoured with distributed ledgers that the “FinTech Advisory Council” was established to foster growth in the sector.
Purchasing a government bond is a form of investing. If you buy a bond from an issuer (in this case, the Austrian government), you are loaning that money with an agreement that the issuer repay the debt over a certain period of time (settlement period), with some form of interest added to make it worthwhile.
ETH will pull data about the bonds from the Auction Procedure for Federal Bonds of the Republic of Austria (ADAS). It will then notarise the bonds as a HASH value in Ethereum’s blockchain. The Republic of Austria guarantees the bonds and the Luxembourg Stock Exchange lists them.
The settlement period of the bonds is certainly noteworthy. Investors will not see returns until at least 2023 – and some will even have to wait until 2028. Austria’s issuance of these bonds represents a long-term, sustained test of this particular use case, and the underlying technology.
While over $1.3 billion sure sounds like a lot of money for Ethereum to handle, it should be noted that ETH won’t handle those funds directly. More simply, Ethereum will write data related to the conditions of the bond to its blockchain for its immutability and trustlessness.
For what it’s worth, Ethereum currently managing around $1.7 billion in transactions every single day, so it certainly seems up to the task.
Also, Austria is not the first to use Ethereum to handle finances.
Recently, the World Bank mandated that the Commonwealth Bank of Australia issue blockchain-based government bonds to public investors. It also uses a private implementation of Ethereum – but it only managed to raise $80 million.
We’ll have to wait and see if Austria can hit their massive billion-dollar target. The outlook does look promising; it has reportedly hit 80 percent of its funding goals this year already – with three auctions left to go.