Editor’s note: This is part 3 of a three-part series about digital tokenized bonds. Read part 1 and part 2.
In part 1 of this blog series, we talked about the potential advantages of digital tokenized bonds (DTBs), namely, cost efficiency, impact measurement, transparency, and simplified operations. In line with this list, we believe DTBs may enable enhanced impact measurement, allowing issuers to track and report on – for example - environmental and social goals transparently and in real time.
The numbers tell the story: in 2024, about $3.7 billion in distributed ledger technology (DLT) based fixed income instruments were issued globally. Yet, compared to the $100 trillion global bond market, this is just a drop in the bucket. Analysts expect tokenized securities to hit $22 billion annually by 2030. In other words, we’re at the very beginning of a massive transformation.
Europe and Asia are setting the pace, with the EU, UK, Switzerland, and Hong Kong moving from pilot to mature regulatory frameworks. Emerging markets like the Philippines, Thailand, or Brazil are exploring tokenization to boost efficiency and leapfrog into advanced infrastructure.
DTBs are not the only financial instruments that benefit from the use of new DLT technology. All the aspects in the lifecycle of a bond, from issuance to settlement, payments to collateral management, taxonomy to regulation would need to align and help create a new digital ecosystem. This will further streamline transactions and reduce costs.
IFC is committed to advancing DTBs through collaboration with public and private stakeholders. This might be a leapfrog for the emerging market and developing economy (EMDE) capital markets. By embracing tokenization, issuers and investors could unlock efficiencies, transparency, and impact-driven investment opportunities that were previously out of reach.
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