Digital Bonds

Definition ∞ Digital bonds are debt instruments that are issued, managed, and traded using digital technologies, often leveraging blockchain. These instruments represent a loan made by an investor to an issuer, with the issuer promising to repay the principal amount along with periodic interest payments. Their digital nature allows for increased efficiency, transparency, and accessibility compared to traditional fixed-income securities.
Context ∞ The issuance of digital bonds is gaining traction as a means for entities to raise capital in a more streamlined and cost-effective manner. Discussions often revolve around the potential for tokenized debt instruments to enhance liquidity, reduce settlement times, and enable fractional ownership of bonds. Regulatory frameworks are still developing to address the unique characteristics of these digital securities, impacting their adoption by both institutional and retail investors.