Tel Aviv Stock Exchange completes proof of concept to tokenize fiat and bonds

A new phase in the Tel Aviv Stock Exchange’s integration of blockchain technology and traditional assets has been completed with the minting of the first dummy digital government bond as an ERC-1155 security token. 

The bond mint is part of the proof of concept (PoC) phase of Project Eden, a partnership between the Israeli Ministry of Finance and the stock exchange to explore blockchain infrastructure in issuing and settling government bonds.

Also included in the proof of concept was the tokenization of an Israeli Shekel — the country’s fiat currency — which will serve as a digital payment token to power transactions. As part of the settlement process, a smart contract for bond management is used, which acts as an intermediary to ensure that transactions are verified and do not contain inconsistencies.

According to a June 6 blog post, the initiative’s go-live event hosted several local and international banks, including Barclays, BNP Paribas, Deutsche Bank, First International Bank, Goldman Sachs, JPMorgan, Merrill Lynch, Bank HaPoalim, Bank Discount, Bank Leumi, and Bank Mizrah.

“We believe that the Startup Nation can play a leadership role in the digital transformation of the capital markets. […] We believe that the capital market information will be completely different in a few years, and it is our job to lead the revolution,” said Ittai Ben Zeev, the CEO of Tel Aviv Stock Exchange.

The PoC was built on an Ethereum Virtual Machine (EVM)-compatible blockchain, allowing future integration with other blockchain solutions. Crypto firms Blockfold and Fireblocks are behind the distributed ledger infrastructure, enabling interaction across wallets and token standards for issuance and trading of treasury bonds, said a Fireblocks spokesperson in a statement to Cointelegraph.

Using Ethereum’s ERC-1155 — the standard interface for the dummy bond minted — a single deployed contract can represent and control a combination of fungible and nonfungible tokens in any amount.

Blockchain-based settlement systems are also under development at the Bank of England and the Bank for International Settlements. Recently, the institutions completed a joint pilot that successfully purchased houses in Wales and England using distributed ledger technology. The project aims to provide a settlement system for central bank digital currencies.

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As for Israel, the central bank is analyzing stablecoin adoption and considering issuing a CBDC to prevent private companies from taking over the country’s digital payments system in the coming years.