Italy’s state-owned bank, Cassa Depositi e Prestiti SpA, has successfully issued $27.2 million in digital bonds in partnership with Intesa Sanpaolo, using the Ethereum layer-2 network, Polygon. This initiative is part of a European Central Bank (ECB) trial to explore blockchain solutions for central bank money settlements.
Groundbreaking Digital Bond Issuance
Cassa Depositi’s digital bond, valued at 25 million euros, marks a significant step in Italy’s financial sector. Governed by the country’s new FinTech decree law, this bond will mature on November 18, 2024, offering a fixed annual coupon rate of 3.63%. Intesa Sanpaolo was the sole institutional investor in this landmark transaction.
The transaction settled on the same day using the Bank of Italy’s “TIPS Hash Link” tool, which enables interoperability between blockchain systems and traditional payment infrastructures.
Advantages of Blockchain Technology
Niccolò Bardoscia, head of digital assets trading and investments at Intesa Sanpaolo, emphasized the transformative potential of public blockchains. He stated, “This transaction demonstrates how public blockchains are a powerful technology for financial institutions, making transactions faster and safer. This technological change will impact not only bonds but every asset class over the coming years.”
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Divergent Views on Tokenization
While proponents like BlackRock CEO Larry Fink foresee a future where all stocks and bonds operate on blockchain rails, not everyone is convinced. Financial law professor Hilary Allen recently cautioned the United States Congress about the fragility of public blockchains, citing inefficiencies and limitations in handling large transaction volumes.
Despite these concerns, the tokenized asset market is expected to grow significantly. Boston Consulting Group predicts it could reach $16 trillion by 2030, although McKinsey offers a more conservative estimate of $2 trillion. Currently, over $89 billion of tokenized assets are managed on blockchain platforms, with Polygon ranking fourth by tokenized value at $40.3 million, following Ethereum, Stellar, and Mantle.
Future of Digital Bonds
This trial by Cassa Depositi e Prestiti and Intesa Sanpaolo highlights the increasing adoption of blockchain technology in traditional finance. As financial institutions continue to explore and implement blockchain solutions, the landscape of asset management and transactions is poised for significant transformation.
