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The Austrian government shall utilize the Ethereum network to issue government bonds worth $1.35 billion in an auction starting next week, reported local outlet Kleine Zeitung on September 27.

Austria’s Blockchain Push

Speaking about the development, Austrian Finance Minister Hartwig Löger noted blockchain technology is an integral part of the country’s economic policy. To support the growth of businesses in the space, the country has set up a FinTech advisory council to “benefit optimally” from the innovation.

The government bond shall be issued by Oesterreichische Kontrollbank (OeKB), one of Austria’s biggest banks, and the auction procedure shall be conducted on behalf of the Austrian Treasury (OeBFA).

OeKB executives highlighted the “blockchain notarization” service, which will be the first-of-its-kind at next week’s Federal Bond Auction, where the successful tests actualize into reality.

The system works on an Ethereum-based public blockchain developed by the Austrian government, called the Direct Auction System (ADAS). OeKB’s IT department will notarize all inputted data sets as individual hash values on the state-developed distributed ledger.

While Ethereum is most famous for facilitating ICO development and payments on its platform, the protocol finds widespread usage in enterprise and government developments as a robust blockchain platform. Ethereum co-founder Vitalik Buterin once described the network as the “Android of blockchain platforms,” meaning any interested party can create their blockchain application on the network instead of building such a system from scratch. In the past, economies like Australia, Germany, and China have utilized enterprise-level Ethereum platforms to issue bonds worth billions of US dollars.

Now, Austria aims to replicate a similar degree of success as its peers and to put blockchain technology to a massive test of sorts. However, the country does not intend to issue the blockchain-based bonds as a replacement to paper or digital alternatives, but instead, complement the existing frameworks.

Markus Stix, the Managing Director of the Austrian Treasury, expressed his thoughts at the development:

“This added security contributes to achieving a high level of confidence in the auction process for Austrian government bonds and strengthens Austria’s good standing in the market, which indirectly also can contribute to favorable financing costs.”

DLT Systems an Ambitious Future

Blockchain technology is undergoing a period of enormous interest and friendliness in the local Austrian economy. The country boasts of Europe’s youngest leader after the previous conservative government was voted out.

In a statement, the Ministry of Finance stated blockchain and related distributed ledger solutions will be “used in many areas” of the digital economy and public administration as an underlying technology. However, blockchain applications have to be subject to various degrees of testing before their suitability in practice is affirmed.

Austria has previously expressed its ambition to become a world leader in blockchain technology. In an event last year, Minister of Economy Harald Mahrer stated:

“To become an innovation leader, we must walk down new paths without taboos and cope with technologies that will radically change many areas of our life tomorrow.”

With this development, the logical next step for blockchain-based bonds would be a digitalized token representing such bond contracts. While countries like Austria are taking a small step towards the digital age, cryptographic tokens backed by government bonds could become common in the next few years due to their substantially better efficiency and trading volume.