A digital bond is a debt instrument issued and managed using distributed ledger technology, typically a blockchain. These bonds replicate the features of traditional bonds but leverage blockchain for improved efficiency, transparency, and potentially faster settlement. They represent a digital record of a loan that pays interest and returns principal.
Context
The financial sector is actively exploring digital bonds as a means to streamline capital markets and reduce operational costs. News reports frequently highlight successful digital bond issuances by major financial institutions or government bodies. These initiatives aim to modernize bond markets, offering benefits like fractional ownership and enhanced liquidity.
Siemens leverages a private permissioned blockchain and central bank digital ledger for a €300 million bond, achieving near-real-time settlement and significantly reducing capital market operational friction.
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