The size of the world bond market in the last 15 years has tripled and now stands at over $100 trillion, compared to the value of equities globally of $64 trillion. The performance of bonds has been helped by falling interest rates, as many governments have looked to keep these rates low, by trying to stimulate their economies via quantitative easing. The World Bank has announced this week the development of a trading platform, powered by Blockchain technology, and in conjunction with Commonwealth Bank of Australia, that will allow the recording of a secondary bond market. Sophie Gilder, head of experimentation & commercialisation at Central bank of Australia Innovation Labs. said: “Blockchain has the potential to streamline processes for raising capital and trading securities, improve operational efficiencies, and enhance regulatory oversight.”
However, while the market for bonds has historically been the preserve for governments and larger companies, smaller organisations have not been able to issue debt as easily. This could be about to change as we are seeing more organisations using Blockchain technology to issue bonds. Already we have seen companies such as Nivura, Société Generale, and BVVA all issuing bonds and raising capital, using Blockchains. It is believed that it will be possible to issue bonds on Blockchains at a cost, which could be at least 60% cheaper than the current method. This ought to allow smaller-sized bonds to be issued, so enabling smaller organisations to become involved in the bond market. If this does happen, then bonds could challenge the Peer2Peer lending market which is predicted to grow by over 50% p.a. and reach over $46 billion by 2022.
#FrontierInsights
Blockchain
Financial Market
