The European Central Bank (ECB) recently conducted digital bond issuance tests with over 60 bond issuers and four central banks. However, the issuers reported that issuance costs increased when using blockchain systems.
In an interview with Cointelegraph, Marat Faritov, vice president of digital assets at Moody’s Ratings, said the increased costs were primarily due to additional legal costs, the lack of onchain settlement mechanisms, and the presence of intermediaries throughout the process attempting to bridge traditional finance and onchain systems.
Faritov explained: “There was this gap of not having digital cash on the blockchain. So payments, interest, and principal payments, as well as the original settlement, were not fully onchain. So they had to trigger traditional banking systems for fiat payments.”
The analyst told Cointelegraph that “disintermediating” the process of issuing blockchain bonds by reducing the number of parties involved in the issuance process and using purely onchain settlement mechanisms would likely bring the costs of issuing tokenized bonds down.