The Inter-American Development Bank (IDB) is blazing the trail for multilateral financial institutions to leverage blockchain technology to create more opportunities by running LACChain, a public permissioned blockchain network.
Being permissioned, LaCChain is different from permissionless blockchains such as Ethereum and Bitcoin, which are open to anyone, as it can only be accessed by users with permission.
The Inter-American Development Bank (IDB) is an organization similar to the African Development Bank (ADB) and shares the objective of improving the lives of people within the region covered.
Through financial and technical support for countries working to reduce poverty and inequality, we help improve health and education, and advance infrastructure.- IDB
IDB has 26 members, which are countries in Latin America and the Caribbean.
91 organizations are already participants in LaCChain and 178 nodes are running on the blockchain with 64 different solutions already implemented.
The solutions include, from the examples and sectors below:
- Agriculture
- Education
- Health
- Digital Identity
- Verifiable Credentials for Vaccination Certificates
- Education Certificates
- Bio-Carbon Registry
The LaCChain blockchain was started by IDB Lab in 2019 to help improve the lives of people in the member states, which is in tandem with the objective of IDB.
The expected results are based on the empowerment of people, improvement in digital security, the generation of confidence in the economy and the digital society, promoting the efficient use of energy, thus supporting inclusive growth, well-being, human rights. people and core values.
These two use-cases were highlighted by Arias Hofman, the CEO of IDB Lab, which runs the blockchain project.
Blockchain Bond Issuance
In August 2022, one of Colombia’s largest banks, Davivienda, issued a $25,000 Colombian blockchain bond on the LaCChain blockchain.
The issuance was piloted in Colombia’s regulatory sandbox and involved the participation of the Central Bank as well as the capital markets regulator in Colombia. All the steps in the process occurred on the blockchain including issuance, trading, and compliance.
Even all the procedures required to go through the National Registry of Securities and Issuers happened on the blockchain. IDB Invest, an independent affiliate of IDB, purchased the bond.
“We have almost a captive market to offer this option,” Aria Hofman said.
IDB Invest already does $7-$8 billion in issuances annually and has 500 private clients made up of financial institutions, infrastructure firms, and real estate companies.
While this was a pilot using a small amount, IDB expects that the practice will be fully commercialized so that private investors can begin to participate in such blockchain bond issuances.
IDB expects to use tokenized money in the next bond.
Digital Money for Social Transfers
IDB, which makes billions of payments annually, has identified the opportunity to do social transfers running on the blockchain, an innovation that could help farmers.
While blockchain payments can help to reduce the cost of remittances, IDB is wary about how communities will access these transfers in a cash-driven society, particularly in the rural communities where IDB works.
“If someone receives a digital payment, they need to be able to convert it to cash easily. So a key push in the future is to target the unbanked and grow use cases that have a social impact,” Aria Hofman said.
Hofman also indicates that at the moment, the opportunity is bigger in the capital markets where they can execute at a very large scale almost immediately.
“But it’s harder to see the impact of that on the ground. And these 64 solutions are an amazing platform to grow from.”
With emerging markets of Africa, the opportunity tapped by IDB would obviously find applications on the continent since similar needs and challenges that exist in the LATAM markets can be found in Africa.
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