Decentralised Finance and Fixed Income – What Went Wrong?

DeFi bonds, that is bonds based on distributed ledger technology (DLT), have been touted as providing a number of advantages including:

  • Faster settlement times – basically in real time; 
  • Reduced risk via immutability of transactions; 
  • Greater transparency;
  • Lower operating costs;
  • Faster issuance, measured in hours.

However, DeFi bonds account for less than 0.001% of the amount outstanding in global fixed income markets, and even less in terms of trading volume. In total, we identified only about 30 issuances of DeFi bonds, and many of these were pilots. However, in 2023 so far, there has been an increase in activity.

 

 

Table of Contents

EXECUTIVE SUMMARY

 

2

INTRODUCTION

 

3

 

DEFINITIONS

3

 

A BRIEF HISTORY

3

THE PROMISE OF DEFI BONDS

 

5

 

T+0 OR REAL-TIME SETTLEMENT

5

 

TRANSPARENCY

6

 

IMMUTABILITY & REDUCED RISK

6

 

EFFICIENCY

7

 

FASTER ISSUANCE

7

DEFI BOND PARTICIPANTS

 

9

 

ISSUERS

11

 

TOKENISATION PLATFORMS

11

 

DLT OR BLOCKCHAIN PROTOCOLS

13

 

DIGITAL EXCHANGES

13

DEFI BOND ISSUANCES

 

15

 

SIX

18

 

UBS

18

 

CITY OF LUGANO

20

 

EUROPEAN INVESTMENT BANK

20

 

SOCIÉTÉ GÉNÉRALE

23

 

SIEMENS

25

ADDRESSING PROBLEMS

 

26

 

SLEIGHTS OF HAND

26

 

SCHIZOPHRENIA

26

 

COMPLEXITY AND CONTRADICTION

27

 

RISK UNLOADED ONTO INVESTORS

27

 

TOO MUCH TRANSPARENCY

29

LOOKING FORWARD

 

26

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