Blockchain bonds workshop: Why tokenise public sector bonds

Governments are increasingly appreciating the potential of blockchain to overhaul financial markets and many are making the technology a core part of their plans for digitalising their economies. A handful of blockchain-native bonds have already emerged from the sovereign, supranational and agency community, but the instruments are a long way from becoming standard.

OMFIF’s Blockchain Bonds Working Group is assembling experts from both token-based and traditional markets to examine the direction of travel in the tokenisation industry. Through two workshops, the working group seeks to find solutions to the problems of standardisation and assess the role of public sector borrowers in setting the tone for innovation.

While there is a variety of hurdles to overcome before tokenisation can become ubiquitous in bond markets, there is certainly demand for tokenised instruments. This is clear from the growing number of secondary-market tokenisation platforms. These immobilise conventional government bonds and issue tokens representing their ownership, allowing investors to take exposure to traditional instruments through tokens.

The first workshop in this series explores the benefits that tokenising public sector bonds can bring. Participants will explore what benefits investors are looking for when they buy these tokenised bonds in the secondary market as well as the benefits for the issuer. The discussion will delve into key questions, such as will tokenisation provide access to new investors? If it’s happening in the secondary market, does that meet investors’ needs, or should issuers take control and issue blockchain bonds in the primary market as well? What new functions or features would doing so deliver?

The outcomes of these discussions will inform the working group’s next paper, due to publish in September. Find the second workshop here.