On May 31, 2023, inside the Tel Aviv Stock Exchange, a dozen banks and their technology partners watched as the State of Israel minted its first digital government bond. The bond was a dummy — no real money changed hands — but the mechanics were real. An ERC-1155 security token was issued on a blockchain platform, paid for in a custom digital payment token pegged to the Israeli shekel, and settled atomically: the bond token and the payment moving simultaneously, irreversibly, in a single on-chain transaction. Goldman Sachs, JP Morgan, BNP Paribas, Deutsche Bank, Barclays, and all five major Israeli banks were in the room. When Project Eden had launched the previous October, the Accountant General, Yali Rothenberg, declared that blockchain-based technologies “are here to stay, and over time will permeate the core of the financial markets, thoroughly and deeply altering them.” The go-live proved him right.

That was nearly three years ago.

Since then, Israel’s national debt has ballooned to $444 billion. The debt-to-GDP ratio has surged from 60 per cent at the end of 2022 to nearly 69 per cent by late 2025, driven by successive conflicts — Gaza, Lebanon, and Operation Epic Fury against Iran. In January 2026, the Finance Ministry raised $6 billion in a landmark three-tranche international bond offering, its first since the Gaza ceasefire, drawing 300 investors from over 30 countries. Demand reached $36 billion. Pricing spreads narrowed to near pre-war levels. Markets, it would seem, still believe in Israel.

But every shekel of that $6 billion was raised using financial infrastructure designed in the twentieth century — intermediated settlement, T 2 clearing cycles, and layers of custodial overhead. The nation that proved it could issue sovereign bonds on blockchain chose not to. The ministry’s own Project Eden report praised the efficiency gains, the risk reduction, the enhanced accessibility. And then — nothing. No live issuance followed.

Why not? And more critically: at what cost?

The option to upgrade

In financial economics, we frame decisions like these through real options theory. Tokenizing sovereign debt is not a binary switch; it is an embedded call option on Israel’s financial infrastructure. The government holds the right — but not the obligation — to........

© The Times of Israel (Blogs)