The City of Quincy on the outskirts of Boston Massachusetts has issued a $10 million municipal bond using blockchain. JP Morgan was the sole underwriter of the tax-exempt seven year bonds and the issuance used the Onyx private permissioned blockchain.
This isn’t the first time JP Morgan has used distributed ledger technology (DLT) for debt issuance. In 2018 it issued a Yankee certificate of deposit for the National Bank of Canada in parallel on the blockchain.
However, the Quincy issuance marks the formal launch of another application for Onyx Digital Assets, the JP Morgan Digital Debt Service. Existing Onyx tokenization solutions include intraday repo and the Tokenized Collateral Network. Additionally, Onyx has solutions for payments such as JPM Coin Systems and Liink for interbank data sharing.
“Over time, we should see blockchain technology usher in lower issuance costs, enhanced liquidity, and reduced settlement times,” said Rick Coscia, Quincy’s strategic asset manager as reported by Bondbuyer.
With DLT can muni bond buyers include the community?
The argument that tokenization brings additional liquidity is controversial in the blockchain sector. On the one hand, automation helps to cut issuance costs, making it viable to use smaller denominations. In turn this can make it accessible to a wider pool of people. However, many enterprise blockchain solutions currently lack integration with other networks and traditional platforms. To Mr. Coscia’s point, that should change over time.
“I look forward to the day when Quincy residents can buy bonds to fund projects in Quincy that directly impacts and improves their quality of life,” added Quincy Mayor Thomas P. Koch.
Joseph Lubin, the CEO of blockchain firm Consensys, voiced that sentiment when it acquired a US broker with the intention of launching “mini munis.” Most municipal bonds have minimum investment amounts of $5,000.
“Tokenized, digital municipal bonds can help restore the muni market to its original community-driven spirit by making the securities more accessible to everyday citizen investors and more cost-effective for communities of all sizes,” said Lubin at the time. JP Morgan is a Consensys investor. We’re not aware of the Consensys subsidiary issuing municipal bonds.
However, another startup Alphaledger used DLT for municipal bond issuance in late 2022.
