In a significant milestone for traditional capital markets, the Tel Aviv Stock Exchange (TASE) and Israel’s Finance Ministry have successfully completed the proof of concept phase for a digital Israeli Bond traded on a dedicated blockchain platform.
This collaboration, known as Project Eden, not only positions Israel to release the world’s first digital government bond but also introduces a digital Payment Token as a fundamental component of the settlement process. The initiative utilizes distributed ledger technology (DLT) and tokenization to revolutionize settlement and issuance processes in the financial market.
A go-live event held at the TASE on May 31 saw the participation of prominent international banks such as Barclays, Deutsche Bank, First International Bank, Goldman Sachs, JP Morgan, Merrill Lynch, alongside Israel’s banks. During this event, the Ministry of Finance issued and minted the first dummy digital governmental bond on a blockchain-based platform.
The platform employed an ERC-1155 Security Token as a specialized decentralized application (dApp) developed using innovative web3 solutions. The blockchain utilized for the occasion was EVM-compatible, allowing potential incorporation with other blockchain solutions in the future.
Project Eden also introduced a digital Payment Token as a pivotal component of the settlement procedure. This Payment Token, based on the ERC-20 token standard, represented one Israeli Shekel within the Eden ecosystem. Throughout the live event, this token was securely transferred through digital accounts, facilitating the settlement of security tokens against various digital currencies. Moreover, it exhibited the potential to integrate with central bank digital currencies (CBDCs). This aligns with global initiatives that explore the integration of CBDCs into traditional financial systems.
The settlement process during the proof of concept utilized ‘Atomic Settlement‘ between Security Tokens and Payment Tokens. The dedicated TASE Bond Management smart contract acted as an intermediary between the issuer and the investors. Its role included verifying valid and approved tokens, preventing inconsistencies or incomplete transfers, and ensuring accurate token transfers. This transformation of the traditional securities settlement process through smart contracts and atomic settlement enhances efficiency, reduces operational risks, and creates new opportunities for investors.
The TASE statement emphasized that leveraging DLT and tokenization enables financial institutions to enhance efficiency, reduce operational risks, and create new opportunities for investors. By adopting these technologies, traditional financial markets can undergo a fundamental transformation. The TASE CEO, Ittai Ben Zeev, expressed his belief that Israel’s capital market possesses the necessary technology talent and market structure leadership to play a leading role in the digital transformation of capital markets. The aim is to revolutionize the capital market landscape in the coming years.
Gil Cohen of the Finance Ministry highlighted that while everyday use of this technology to finance government debt is still in the future, the successful proof of concept demonstration promotes technological and regulatory discourse among relevant parties. The shared goal is to improve the accessibility of financial markets for all stakeholders. This signifies a commitment to ongoing progress and collaboration in adopting innovative technologies that benefit the financial sector and promote market accessibility.
Israel’s Project Eden, a collaboration between the TASE and Israel’s Finance Ministry, has achieved a significant milestone by completing the proof of concept phase for a digital Israeli Bond traded on a dedicated blockchain platform. With the introduction of a digital Payment Token and the utilization of smart contracts and atomic settlement, the initiative aims to revolutionize settlement and issuance processes in traditional capital markets. This pioneering project sets the stage for the world’s first digital government bond and reinforces Israel’s position in leading the digital transformation of capital markets.
