{"id":14451,"date":"2022-01-11T16:18:57","date_gmt":"2022-01-11T10:48:57","guid":{"rendered":"https:\/\/zebpay.com\/?p=14451"},"modified":"2022-01-11T16:18:57","modified_gmt":"2022-01-11T10:48:57","slug":"digital-bonds-disrupting-financial-markets","status":"publish","type":"post","link":"https:\/\/zebpay.com\/in\/blog\/digital-bonds-disrupting-financial-markets","title":{"rendered":"Digital Bonds: Disrupting Financial Markets"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/zebpay.com\/in\/blog\/digital-bonds-disrupting-financial-markets\/#What_are_Digital_Bonds\" title=\"What are Digital Bonds?\u00a0\">What are Digital Bonds?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/zebpay.com\/in\/blog\/digital-bonds-disrupting-financial-markets\/#Action_in_Financial_Farkets\" title=\"Action in Financial Farkets\">Action in Financial Farkets<\/a><\/li><\/ul><\/nav><\/div>\n\n<p><strong>Digital bonds are identical to paper debt securities but offer efficient, cheaper and fast functionality. Consequently, European Investment Bank and SIX are the first ones to offer digital bonds on a public blockchain. This has opened up the possibility of disruption of a $120 trillion financial industry.\u00a0<\/strong><\/p>\n\n\n\n<p>The world is growing at a rapid pace today. Stock prices are reaching all-time highs for the first time and this trend is likely to continue. One crucial element that works are lubrication to the engine of our economies is debt. Businesses take debt and invest money to create value. One such instrument is a bond, debt security. Borrowers issues capital bonds to investors who pay money to the borrower. Issuing bonds is like a promise to pay back. Recently, digital bonds have come up with the advancement of technology. Especially with blockchain technology, smart contracts and cryptocurrencies, institutions have found a better way of raising money through bonds. Not just that, Digital bonds are expected to <a href=\"https:\/\/www.spglobal.com\/ratings\/en\/research\/articles\/211004-digitalization-of-markets-how-digital-bonds-can-disrupt-a-120-trillion-market-12131989\" target=\"_blank\" rel=\"noopener\">disrupt a $120 trillion industry.<\/a> Let\u2019s dive into what it is!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-are-digital-bonds\"><span class=\"ez-toc-section\" id=\"What_are_Digital_Bonds\"><\/span>What are Digital Bonds?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to <a href=\"https:\/\/www.suretycanada.com\/\" target=\"_blank\" rel=\"noopener\">Surety Association of Canada<\/a>, a bond must meet three criteria to be a legitimate digital bond. They are the integrity of content, secure access, and verifiability. In simpler terms, it is no different from a normal bond. They serve the same purpose and offer low risk and low return investments. However, they change the process of issuing such bonds and make them entirely online. Generally, a bond requires an issuer, an investor, a broker and a ledger. <\/p>\n\n\n\n<p>There are certainly benefits to shifting towards this newer innovation. First, the providers of the bonds can enjoy a streamlined and automated bond issuance process. The issuance process for a normal (paper) bond is quite time-consuming. Second, investors are assured of built-in verifiability and integrity. Thus, making them more reliable and verifiable. Third, there is a reduced chance of errors or improper execution as the entire is digitally executed.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-action-in-financial-farkets\"><span class=\"ez-toc-section\" id=\"Action_in_Financial_Farkets\"><\/span>Action in Financial Farkets<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are about <a href=\"https:\/\/en.wikipedia.org\/wiki\/Smart_bond_(finance)\" target=\"_blank\" rel=\"noopener\">14 bonds<\/a> that have been issued digitally globally. Their value ranges from $20 million to $2.6 billion with year to maturity ranging from 1 to 10 years. Moreover, in April 2021, European Investment Bank (EIB) offered the first-ever digital bond on a public blockchain. EIB issued a $100 million 2-year bond and used <a href=\"https:\/\/zebpay.com\/buy-ether\/\">Ethereum<\/a> public blockchain for issuance. Since Ethereum has smart contract capabilities. Issuers and investors represent their fiat currency using <a href=\"https:\/\/help.zebpay.com\/support\/solutions\/articles\/44000886751-erc20-faq\">ERC-20 <\/a>tokens. The entire exercise was an experiment to test the viability of such bonds. EIB found that the digital helped in improving speed and efficiency, reduction in costs associated, increased transparency and public access.\u00a0<\/p>\n\n\n\n<p>In Nov 2021, <a href=\"https:\/\/www.six-group.com\/en\/home.html\" target=\"_blank\" rel=\"noopener\">SIX<\/a> launched a CHF 150 million digital bond, the world\u2019s first digital bond in a fully regulated environment. Therefore, making strides towards full adoption of the digital instrument.\u00a0Moreover, The recent rise of these bonds have caused the <a href=\"https:\/\/www.forbes.com\/sites\/vipinbharathan\/2021\/11\/20\/the-first-digital-bond-issued-in-a-regulated-market-by-six-points-to-a-need-for-standards\/?sh=551b096b7fef\" target=\"_blank\" rel=\"noopener\">regulatory framework<\/a> to evolve. However, the speed at which digital bonds disrupt money markets will depend on how fast the hurdles subside. The hurdles are regulation from the authorities, compliance necessities, and cost of innovation. Needless to say, digital bonds are on the rise<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Digital bonds are identical to paper debt securities but offer efficient, cheaper and fast functionality. Consequently, European Investment Bank and SIX are the first ones to offer digital bonds on a public blockchain. This has opened up the possibility of disruption of a $120 trillion financial industry.\u00a0 The world is growing at a rapid pace [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14452,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_ayudawp_aiss_exclude":false,"footnotes":""},"categories":[14],"tags":[16],"acf":[],"_links":{"self":[{"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/posts\/14451"}],"collection":[{"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/comments?post=14451"}],"version-history":[{"count":0,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/posts\/14451\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/media\/14452"}],"wp:attachment":[{"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/media?parent=14451"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/categories?post=14451"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zebpay.com\/in\/wp-json\/wp\/v2\/tags?post=14451"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}