Bond Financialization

Definition ∞ Bond financialization involves converting traditional debt instruments, such as government or corporate bonds, into digital tokens on a blockchain. This process aims to increase liquidity, transparency, and accessibility for a broader range of investors by fractionalizing ownership and streamlining settlement. It represents a convergence of conventional financial markets with decentralized ledger technology, potentially reducing intermediation costs and operational complexities. The digital representation allows for programmable features and automated execution through smart contracts.
Context ∞ The discussion surrounding bond financialization centers on its potential to modernize fixed-income markets and its implications for regulatory oversight. A critical debate involves balancing the benefits of tokenization with existing legal frameworks and investor protection requirements. Future developments are expected to see increased institutional participation and the creation of hybrid financial products that combine traditional bond characteristics with blockchain-native functionalities.