Key Takeaways
- Once an experimental frontier, tokenized bonds are increasingly used to finance public investment.
- Around the world, state-owned investors, supranational development banks, and municipal authorities have embraced the technology.
- As the concept matures, platforms and issuance models are evolving.
In recent years, tokenized bonds have become an increasingly popular way for public investors to bankroll infrastructure and development projects.
With advantages including near-instant settlement, reduced counterparty risk, and greater access for investors, new state-backed on-chain debt instruments are cropping up from Europe to China and beyond.
Tokenized Bonds in the Public Sector
The first public sector body to explore tokenized bonds was the Queensland Treasury Corporation, which first piloted the concept way back in 2017.
Australia remained ahead of the pack in 2018, when the World Bank raised AUD $110 million via its bond-i scheme. Proceeds from the sale were channelled to the International Bank for Reconstruction and Development, which finances sustainable development projects around the world.
Since then, state-owned investors, supranational development banks, and municipal authorities around the world have embraced tokenization, and central banks aren’t far behind. With Slovenia and Luxembourg leading the way, major economies like the U.K. and are preparing the ground for their own sovereign digital bonds.
As the concept has matured, issuers have explored increasingly complex bond structures.
In 2024, the government of Hong Kong launched the first multi-currency digital bond offering denominated in HK dollars, Renminbi, US dollars, and euros.
Meanwhile, the range of distributed ledgers being deployed has grown since the World Bank first launched its bond-i program on Ethereum.
Blockchains and Ledgers
Since 2018, the bond-i program has been expanded to SIX Digital Exchange (SDX), which is built on a permissioned version of R3’s Corda.
SDX has also proven popular with Swiss municipalities. In 2023, the City of Lugano and the cantons of Basel City and Zurich selected the platform for their respective bond issuances, the latter two marking the first time bonds were settled with the country’s wholesale central bank digital currency (CBDC).
Other prominent solutions include HSBC’s Orion and Goldman Sachs’ GS DAP, which have been used by the European Investment Bank and the Hong Kong Monetary Authority.
Like SDX, both Orion and GS DAP run on private, permissioned ledgers. Compared to public blockchains, these platforms grant more control over access and onboarding, and offer greater privacy for bondholders.
Embracing Public Markets
While the first wave of tokenized public bonds was generally reserved for banks and institutional investors, state-backed issuers are increasingly opening up to public markets.
Projects like Thailand’s “G-Token” are explicitly aimed at retail investors, offering low minimum purchase thresholds and integration with crypto exchanges.
Meanwhile, although Hong Kong’s first tokenized bonds were exclusively distributed via private placements, a recent issuance by Shenzhen Futian Investment Holdings (SFIH) marked the first time tokenized municipal bonds were listed on Chinese securities exchanges.
The RMB 500 million ($70 million) offering was also notable for including Ethereum.
Since banning cryptocurrencies in 2021, Beijing has downplayed the role of permissionless public blockchains, emphasizing private- and consortium-led platforms that are easier for the state to control.
Despite this, the recent SFIH initiative suggests that when it comes to publicly traded securities, permissionless blockchains may still have a role to play, especially under Hong Kong’s more permissive regulatory umbrella.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
