Alphaledger has 3 municipal bonds on blockchain – Ledger Insights
On Friday, US startup Alphaledger said it registered three US municipal bond issues on its permissioned blockchain. But for now there is parallel record keeping.
The main benefits of using blockchain are improved transparency and lower costs. Distributed ledger is used for a wide range of bond issues and digital assets, often because the efficiency gains make smaller issues more practical. In the US, the vast majority of bond issues are in the category below 50 million dollars.
According to SIFMA, by 2021 there were 13,000 muni bonds issued worth $482 billion. In terms of U.S. interest income, the value of outstanding muni bonds is the fourth largest, after Treasuries, mortgage-related and corporate bonds.
Recording the issue on a blockchain is just the first step planned by Alphaledger, which has an eye on using smart contracts for on-chain clearing and custody.
The company was started in 2019 by a core team of former PIMCO founders and first focused on the municipal loan market to digitize a very manual process. This enables community banking investors to extend their reach beyond the local area. Diversifying portfolios reduces their exposure to hyperlocal environmental risks.
In addition to recording loan issuances, Alphaledger has developed its activities to record a sale on the secondary market and record municipal security originations (parallel record keeping).
“Schools, water, power, roads — these are infrastructure critical to America’s growth that have been difficult for investors to directly access in the traditional financial system,” said Alphaledger co-founder Manish Dutta. “Alphaledger is built to provide greater transparency, traceability and accessibility for cities and municipalities that issue bonds and to support investors who want to access the returns they offer.”
While Alphaledger is primarily a technology company, to facilitate transactions on its platform, it has a transfer agent subsidiary and a FINRA-registered broker-dealer Iris Technology.
Meanwhile, back in 2020, blockchain startup ConsenSys acquired a US broker-dealer aiming to tokenize the municipal bond market, with a similar vision to Alphaledger.
Many companies are developing platforms for issuing blockchain bonds, and several government-backed organizations have used blockchain to issue bonds, but only a few are in the municipal market. Examples of issues include the World Bank, the European Investment Bank (EIB) and consumer-targeted government bonds issued in the Philippines and Thailand.
On the corporate side, last month saw the largest blockchain issuance to date from UBS for CHF 375 million ($370 million).
