The City of Quincy, situated adjacent to Boston, Massachusetts, has recently engaged in a pioneering financial endeavor, issuing a $10 million municipal bond utilizing blockchain technology. Spearheaded by JP Morgan, acting as the exclusive underwriter, the tax-exempt seven-year bonds were facilitated through the utilization of the Onyx private permissioned blockchain.
JP Morgan’s foray into distributed ledger technology (DLT) for debt issuance is not novel. In a prior instance in 2018, the financial giant orchestrated the issuance of a Yankee certificate of deposit for the National Bank of Canada, concurrently leveraging blockchain technology.
However, the Quincy bond issuance signifies the official debut of another groundbreaking application for Onyx Digital Assets, namely the JP Morgan Digital Debt Service. This initiative supplements Onyx’s existing tokenization solutions, encompassing intraday repo and the Tokenized Collateral Network. Furthermore, Onyx boasts payment solutions such as JPM Coin Systems and Liink for interbank data exchange.
Rick Coscia, Quincy’s strategic asset manager, conveyed optimism regarding the transformative potential of blockchain technology. He asserted that blockchain adoption is poised to drive down issuance costs, enhance liquidity, and streamline settlement processes gradually, as reported by Bondbuyer.
The assertion regarding the augmented liquidity brought about by tokenization remains a subject of contention within the blockchain domain. While automation facilitates a reduction in issuance expenses, thereby enabling the utilization of smaller denominations and broadening accessibility, the integration of many enterprise blockchain solutions with conventional platforms remains incomplete. Nonetheless, proponents, including Mr. Coscia, anticipate progressive integration in the foreseeable future.
Expressing anticipation for the democratization of investment opportunities, Quincy Mayor Thomas P. Koch articulated a vision wherein residents could directly contribute to local projects through bond acquisitions, thereby enhancing their quality of life.
Joseph Lubin, CEO of blockchain enterprise Consensys, echoed similar sentiments, particularly emphasizing the potential for tokenized digital municipal bonds to democratize the investment landscape. Lubin’s vision includes the restoration of the muni market’s community-centric ethos, making securities more accessible and cost-effective for investors of varying means. Notably, JP Morgan maintains investment ties with Consensys, although there is no record of the latter’s subsidiary engaging in municipal bond issuance.
Despite JP Morgan’s milestone, the landscape of blockchain-enabled municipal bond issuance has witnessed prior ventures. Alphaledger, a startup, notably employed DLT for municipal bond issuance in late 2022, marking another instance of innovation within the sector.