Central Bank of Colombia Introduces First Blockchain Bond Pilot Program
The first blockchain bond pilot program in Colombia has been announced by the Central Bank of Colombia. A private commercial bank by the name of Davivienda and the Interamerican Development Bank (IDB) are also participating in it. The IDB has developed the Lacchain blockchain platform, which will be used for proof of concept and the IDB will also be responsible for handling the operating aspect of the issuance. Davivienda is one of Colombia’s most important commercial banks. The purpose of the pilot program is to explore the benefits of the new blockchain technology and to study its application where bond issuance is concerned.
The Interamerican Development Bank (IDB) will be providing counseling in this case. The Central Bank of Colombia made an official announcement regarding this matter and said that the potential reduction in operational costs would be included in the benefits. Other advantages include eliminating asymmetries in information, optimizing process times, increased efficiency in the security and traceability of operations and managing financial risks in a better way. As mentioned above, this kind of application would be supported by Lacchain, the blockchain platform that IDB has developed. As far as the central bank is concerned, its role would be to operate an observing node in the blockchain as well as supporting the issuance in their payment system.
Even though Colombia has not been known for its adoption of blockchain or cryptocurrency, the country is finally making the right moves. They are now moving towards slowly introducing these new technologies into their financial system. Earlier this year in February, the SFC, which is the country’s financial watchdog, gave the authorization to establish a regulatory sandbox. This could be used by some banks for establishing alliances with crypto exchanges in order to process purchases of these digital currencies in a joint effort.
The bank that is involved in this particular blockchain bond trial i.e. Davivienda, was also part of the batch of banks using the regulatory sandbox. The goal of establishing this regulatory sandbox was to get a better understanding of how it is possible to use traditional banking systems in tandem with the new cryptocurrency systems. This can be helpful in issuing new laws that can be used for adapting to this new paradigm. Moreover, this move is an indication that Colombian regulators have come to accept the influence cryptocurrencies are likely to have in the country in the near future.
However, it is worth noting that the retail cryptocurrency business in the country is on a very small scale and it simply hasn’t reached the same level as it has in other countries of the region, such as Argentina and Venezuela. Regardless, it appears that the Colombian government prefers to be proactive in coming up with laws for dealing with cryptocurrencies, rather than waiting for it to gain traction in the country first and then responding to it, something that other regions appear to have done. This can prove to be a smart move in the long run.