Bank

when

Update Dec. 12, 21:57 UTC This article has been updated to reflect that only one ECB test used CBDC settlement
The European Central Bank (ECB) recently conducted digital bond issuance tests with over 60 bond issuers and four central banks. However, the issuers reported that issuance costs increased when using blockchain systems. 
In an interview with Cointelegraph, Marat Faritov, vice president of digital assets at Moody’s Ratings, said the increased costs were primarily due to additional legal costs, the lack of onchain settlement mechanisms, and the presence of intermediaries throughout the process attempting to bridge traditional finance and onchain systems. Faritov explained:
<blockquote>
 "There was this gap of not having digital cash on the blockchain. So payments, interest, and principal payments, as well as the original settlement, were not fully onchain. So they had to trigger traditional banking systems for fiat payments."
</blockquote>
The analyst told Cointelegraph that “disintermediating” the process of issuing blockchain bonds by reducing the number of parties involved in the issuance process and using purely onchain settlement mechanisms would likely bring the costs of issuing tokenized bonds down.
<figure>
 <img alt="Disintermediation can lower cost of tokenized bonds — Moody's analyst" src="https://s3.cointelegraph.com/uploads/2024-12/0193bbbb-dfb4-725f-929f-55f8e7351ded" title="">
 <figcaption style="text-align: center;">
 A simplified graphic of bond settlement between parties using central bank money. Source: Moody’s Ratings
 </figcaption>
</figure>
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/el-salvador-platform-raises-30-million-tokenized-us-treasury-offering" rel="null" target="null" text="null" title="null">El Salvador’s digital asset issuer raises $30M via US Treasury offering</a>
<h2 id="tokenized-treasurys-and-bonds-projected-to-grow">Tokenized Treasurys and bonds projected to grow</h2>
Faritov’s assessment is corroborated by recent developments in Hong Kong’s financial system. In November, the Hong Kong Monetary Authority (HKMA), announced it would <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/hong-kong-central-bank-launch-subsidies-digital-bonds" rel="null" target="null" text="null" title="null">subsidize tokenized bond issuance</a> to incentivize companies to digitize bonds.
Despite the lack of cost savings, the tokenized government securities market continues to grow. <a data-ct-non-breakable="null" href="https://app.rwa.xyz/assets/BUIDL" rel="null" target="null" text="null" title="null">According</a> to RWA.xyz, BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) currently has a market capitalization of approximately $561 million.
Tokenized US Treasurys are <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/tokenized-us-treasuries-3-billion-2024" rel="null" target="null" text="null" title="null">projected to reach $3 billion</a> in assets under management by the end of 2024. Data from Dune Analytics shows that there are currently $2.64 billion in tokenized government securities.
The vast majority of these government securities are US government debt funds, with only one fund, EUTBL on the Spiko protocol, focusing on Euro-denominated government securities.
<figure>
 <img alt="Disintermediation can lower cost of tokenized bonds — Moody's analyst" src="https://s3.cointelegraph.com/uploads/2024-12/0193bbbe-f2f9-7fac-a96b-2041557e88a7" title="">
 <figcaption style="text-align: center;">
 Tokenized government securities continue to grow. Source: <a data-ct-non-breakable="null" href="https://dune.com/21co/tokenization-government-securities" rel="nofollow noopener" target="_blank" text="null" title="https://dune.com/21co/tokenization-government-securities">Dune</a>
 </figcaption>
</figure>
Real-world asset tokenization, which includes government securities, stablecoins, and tokenized real-world items, is forecasted to be a <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/rwa-tokenization-trillion-dollar-growth-driven-financial-institutions" rel="null" target="null" text="null" title="null">$30 trillion sector by 2030</a>.
Jesse Knutson, the head of operations at Bitfinex Securities, recently told Cointelegraph that the trend toward tokenization will primarily be driven by more nimble institutions, which will eventually pull in larger institutional players.
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/india-bitcoin-ban-bingx-hacker-lazarus-asia-express/" rel="null" target="null" text="null" title="null">India mulls new crypto ban to support CBDC, Lazarus Group strikes again: Asia Express</a>

Disintermediation can lower cost of tokenized bonds — Moody's analyst

Table of Contents

Cointelegraph

Other articles published on Dec 12, 2024

Circle and Binance Partner to Drive Global USDC Adoption and Battle USDT

Turn Your Christmas Wish Into Reality — Invest in These 5 Cryptos to Build a $1M Portfolio!

OpenAI goes dark after Apple update combines Siri and ChatGPT

Coinbase to Delist Tether (USDT) in Europe

Could Catzilla Explode Like POPCAT or WIF? Discover the Memecoins Experts Are Betting on for 2025!

Bitcoin ATM Operator Byte Federal Reports Data Breach Affecting 58,000 Customers

Join our free newsletter for daily crypto updates!