Covered bond digitization converts traditional covered bonds into digital tokens on a blockchain. This process involves representing the legal rights and obligations of a covered bond as a digital asset on a distributed ledger technology platform. It aims to modernize the issuance, trading, and settlement of these debt instruments, potentially reducing operational costs and increasing market access. The underlying collateral pool remains subject to existing legal frameworks, ensuring investor protection similar to conventional covered bonds.
Context
The discussion surrounding covered bond digitization involves its potential to bring greater transparency and efficiency to fixed-income markets. A key debate revolves around harmonizing existing financial regulations with the immutable nature of blockchain records. Future developments could see wider institutional adoption as legal and technical standards for digital securities mature, potentially attracting new classes of investors.
SG-FORGE's tokenization of a €100M covered bond on a public ledger establishes a T+0 settlement blueprint for capital markets and unlocks new institutional liquidity.
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