now loading...
Wasn’t the upbeat tone of the Association for Financial Markets in Europe’s ( AFME ) October 6th Distributed Ledger Technology-Based Capital Market Report a victory of hope over experience, i.e., that the continued rapid growth in global DLT adoption in capital markets and emergence of new participants and platforms signal increasing interest in the technology’s transformative capabilities?
I ask as it appeared somewhat incongruous when set against the actual data, certainly when applied to developments in the primary DLT fixed-income market.
That’s not to say there haven’t been developments in the area of primary bond digitalization and automation in the area of DLT and elsewhere. Fintechs and numerous other parties involved in digitalizing and automating new-issue bond processes have expended enormous amounts of time, effort, and energy over the years to create, launch, iterate, and offer tools, solutions, and platforms that solve for one or multiple aspects of the process, and pushed hard to generate engagement and onboard clients.
And in fairness, some fintechs have pointed ( or their clients have ) to year-on-year progress or to having hit important milestones. But generally speaking, it’s been a hard slog, and I know some digital aspirants have found the pace of progress and paid take-up demoralizing.
Paltry volumes
In the meantime, digital bond volumes, both in and away from the DLT/blockchain world, barely constitute a rounding error, although AFME puzzlingly reckons activity represents “a promising foundation for future growth”. Talking about future growth is just glib, especially when activity, from where I sit, is far from promising.
Issuers to-date have predominantly hailed from the public-finance area. OK, that’s positive as this segment issues a prodigious amount of debt annually. Digital issuers to-date include supranationals ( European Investment Bank, World Bank, Inter-American Development Bank ), government and regional agencies ( KfW, NRW.Bank, City of Lugano, cantons of Zurich, Basel and St Gallen ), and sovereigns/sub-sovereigns ( Hong Kong SAR, Luxembourg, Slovenia ).
A motley group of financial services companies have also dipped their toes into the digital pond: First Abu Dhabi Bank, HSBC, Nomura Research Institute, SIX Group, Türkiye Iş Bankasi, UBS. Meanwhile, issuers from China/HK ( issuing in RMB and USD ) have shown livelier interest than their counterparts elsewhere: Bank of Communications HK, Guotai Junan International, Shandong Hi-Speed Holding, Shenzhen Futian Investment, Zhuhai Huafa Group.
As far as I can ascertain, the only major corporate entity to have got involved this year is Toyota Financial Services, which did a pilot 1 billion yen ( US$6.5 million ) Wallet ST Bond in March.
DCM-focused fintechs ( many of which I’m familiar with ) and the growing army of people engaged in primary market technology roles at investment banks, institutional asset managers and other parties in the issuance chain ( ditto ) will doubtless roll their eyes firmly northwards when I say this – and I do say it regularly: when you set US$9.5 trillion of bonds issued in the first nine months of 2025 ( LSEG number ) against global DLT fixed-income issuance in the first nine months of 2025 of less than US$2 billion ( AFME number, down 44% year-on-year ), the scale of the issue becomes clear.
Adding non-DLT digital bond issuance could take the number closer to US$5-6 billion ( a bit of a guesstimate ), marginally less discomfiting but not moving the needle. Why are DLT new-issue bond volumes so moribund? Because European Central Bank’s DLT trials ended last November, AFME reckons. These contributed over €1 billion ( US$1.16 billion ) to issuance, or 30% of the 2024 total. The Swiss National Bank’s Helvetia Pilot reportedly contributed €269 million equivalent in early 2025 ( €975 million issued since inception in 2023 ). OK, fine, but then where do we go from here?
Sounds great on paper
I’ve followed the automation and digitalization of various aspects of the new-issue bond process and the emergence of blockchain/DLT and other digital solutions for years. I’ve been chairing an annual event in London for the past eight years or so with panels of fintech executives, investment bankers, investors, issuers, and service providers to discuss year-on-year developments.
Developments that seek to accelerate and simplify the process of issuing and settling bonds in a seamless end-to-end automated chain; to minimize manual intervention by multiple parties; avoid the proliferation of different versions of documentation, term sheets, and order books; reduce errors; and take the process of issuing, intermediating, investing in, clearing and settling bonds into a new era of invention and innovation.
But developments to-date have failed to deliver on an industrial scale. A running joke in bond syndication has been that the last major innovation was the introduction of spreadsheets and email. Another constant line of narrative ( not intended as a joke ) has been that the next year will see a technological revolution in bond issuance.
Interoperability conundrum
But as I watch for developments, each year ends up being much more of an evolution. And a slow one at that. Maybe that’s not surprising as an entirely new technological, operating and, in some cases, regulatory framework needs first to be built and, second, adopted before digitally-native and/or fully digitalized debt issuance per se takes off. But after years and years of pilot issues, testing, and trials, I do wonder why the pace of change has been so glacial.
Beyond central bank trials ending, I guess another reason that partly or maybe even largely explains it is that market participants are terrified – arguably rightly so – of choosing the “wrong” tool, platform or solution as others may gain better market traction. Lack of interoperability is another major challenge as many solutions are built, productized, and marketed independently of each other. Among other things – and here I do agree with AFME – limited interoperability between DLT infrastructures has led to fragmented and illiquid secondary markets.
As well as a host of third-party and consortium solutions, banks have developed their own branded digital platforms as components of their competitive service offerings, including ( in alphabetical order to avoid accusations of bias ):
Postscript
As a final point, tracking the development of digital bonds is tough. There’s no golden source of deals data. The International Capital Market Association’s primary market tracker is a helpful source, while many ( but not all ) large issuers that have issued digital bonds or completed pilot issues have PR’d the fact.
But information is fragmented, issues are done as private placements, as pilot issues or proofs of concept, are done under the radar, and/or under trial programmes where granular data is not always immediately forthcoming. Researching the topic throws up multiple digital bond imprints that have key data like ISINs, issue amounts, and coupons missing, rendering much of it unreliable, hence unusable.
That’s surely a business opportunity for someone. Actually, watch this space …
