Austria is deploying an Ethereum-based blockchain notarization service during a federal bond auction on 2 October 2018, after a series of successful tests. The bonds being auctioned include a 0.75% bond from 2018-2028 and a 0% bond from 2016-2023, totaling EUR 1.15 billion. This is the first time the Austrian government has officially used blockchain for financial transactions.
The Austrian Federal Minister of Finance, Hartwig Loger, says, “The digitization of the financial sector, also known as FinTech, has long arrived in Austria. We need to use the positive effects intelligently for the financial services sector. Blockchain technology is an economic policy focus for us. With the establishment of the FinTech Advisory Council in the Ministry of Finance, we are developing strategies to help Austria make the best possible use of these developments.”
Issuance of federal debt via bond auctions is big business for governments, and it is certainly groundbreaking that blockchain technology is now being used for bond auctions in excess of USD 1 billion. Blockchain technology can be used to make bond auctions more secure and trustworthy, by storing details of the bond auction on an immutable and unhackable ledger. Markus Stix, the Head of Oesterreichische Kontrollbank, which is a bank that conducts federal bond auctions for the Austrian government, says, “This added security contributes to a high level of confidence in the auction process of Austrian government bonds and strengthens Austria’s good standing in the market, which can also indirectly contribute to favorable financing costs.”
Essentially, Stix is saying that using blockchain technology increases investor’s trust in the bond auction, since all data is permanently stored in a ledger that can be accessed worldwide, and this could cause increased investment into bonds in the future since investors feel safer.
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