Blockchain startup Nivaura today initiated its first bond denominated exclusively in ether, built under regulatory oversight of the FCA. What’s truly disruptive about the issuance isn’t the use of cryptocurrency, rather it’s that the bond will be cleared, settled and registered on the public ethereum blockchain. With a relatively short lifecycle of only one week, the bond is also part of a larger experiment to see if removing financial middlemen can make such investment vehicles more accessible to small businesses on a massive scale.
And while private blockchains have largely been the purvey of CSDs and other legacy infrastructure providers, the founder and CEO of venture-backed Nivaura, Avtar Sehra, argued that the new bond shows the potential of public blockchains when applied to enterprise business models.
To ensure the ethereum bond aligned with existing workflows, a number of counterparties were involved in its creation. In preparation for the project, JPMorgan helped build a bond that could be used for a wide range of asset classes and aligned with their own internal processes. With the help of law firm Allen & Overy Nivaura then used that structure to construct legally compliant documentation that automated the work using ethereum smart contracts.
In turn, credit rating firm Moody’s priced the instrument by providing data to generate yield curves, factoring the volatility of ethereum into the structure of the bond itself.